But as the pair again donned the cloak of crisis fighters, their efforts underscored what’s changed in the last three years. The men, battle-hardened and more experienced, now have little more than the power of persuasion. No longer can they muster the same range of policy tools and supporters they had in 2008 should the European crisis become an even greater menace to the U.S. economy.
As Europe’s financial worries spread to new countries and financial firms last week, U.S. and other global markets experienced one of the most tumultuous weeks of trading in their histories. Markets open again Monday with persisting concern about Europe, anxiety about the prospect of a double-dip recession and continuing fallout from the historic downgrade of the U.S. credit rating by Standard and Poor’s earlier this month.
When the financial crisis hit in 2008, Bernanke was a relatively new Fed chairman, and Geithner was his chief emissary on Wall Street as president of the Federal Reserve Bank of New York. Along with then-Treasury Secretary Henry M. Paulson Jr., whom President George W. Bush tapped to lead the rescue, they organized the massive and unpopular bailout that helped stem a rapid financial decline.
Today, Geithner’s options are constrained by gridlock in Congress. Any fresh proposals to invigorate the economy would face Republican skepticism. And instead of devoting his full attention to the country’s flagging economic recovery and mounting threats from Europe, Geithner spent much of the last few months planning for the possibility Congress would not raise the federal debt limit, confronting the government with default. He also was focused on negotiations among Democrats and Republicans over a deal to tame the debt.
Geithner, 49, has wanted time off after a nonstop schedule, starting in 2007, that involved rescuing the banking and automobile industries, the design and passage of legislation to overhaul financial regulation, and several tax and budget fights. But he recently agreed to stay at the Treasury Department after a plea from President Obama. Geithner’s family is moving back to New York, and he will commute to Washington.
Bernanke, 57, meanwhile, has been pushing the Fed to take a series of steps over the past three years to spur economic growth. But he has exhausted the Fed’s usual tools — for instance, lowering interest rates, which are now near zero — and is facing new opposition from members of the Fed’s policymaking committee who are worried about the risk of inflation or new financial bubbles.
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