Fareed speaks with former U.S. Treasury Secretary Tim Geithner about the Obama administration’s response to the financial crisis. Watch the full interview on "Fareed Zakaria GPS," this Sunday at 10 a.m. and 1 p.m. ET on CNN
So the strategy that you adopted has often been criticized. It was criticized at the time and is criticized in retrospect as bailing out Wall Street at the expense of Main Street. What do you say?
It’s a common perception, and it's a completely understandable perception because what you had to do to protect the economy of the country – the average person running a business or just trying to keep their job – what you had to do to protect them in a classic financial panic feels deeply unfair.
It's completely counterintuitive. And that's because the central imperative then is to make sure you prevent the collapse of the system. You keep the lights on. You know, think of the banking system. We don't like to think of this way, but think of it as the power grid. It's like a vital, essential thing. And what you saw in the Great Depression and you saw in countries since then is that if you let panic escalate and that fire burn too, too strong, it's devastating.
You know, unemployment in the Great Depression went to 25 percent. Output fell by 25 percent. It took a decade to begin to heal the damage. So the counterintuitive thing, what feels really unfair but what's essential in a classic panic, is you have to act incredibly aggressively to make sure you prevent that loss of savings – that damage to the power grid. And that's what we did.
We didn’t do it because we had any interest in protecting people on Wall Street from the errors of their mistakes. We did it because it was the only way we could protect the average person from mass unemployment.