The Atlantic on Geithner

I enjoyed this long profile of Treasury Secretary Tim Geithner in the Atlantic over lunch today and learned a lot about the backstory of the financial crisis.

The story does have a couple of weaknesses.

First, it treats the theory of regulatory capture as some sort of theory without evidence invented by George Stigler. In fact, it has a broader intellectual provenance within economics than even just Chicago and a lot of compelling evidence to back it up. [A related minor point: Stigler was a classical liberal, not a conservative.]

Second, the author of the article clearly likes Geithner, but faults him for not wanting to regulate Wall Street hard enough. This both mistakes the issue as "a lot versus a little" (the thermostat model of regulation) rather than "smart or dumb" and mistakes the point of regulation, which is to improve efficiency, not administer punishment.

Third, there really is no way, due to technological and institutional change, to go back to the static environment of Glass-Steagall. In general, there is too much praise for New Deal era banking regulations, which included idiocies like state-level prohibitions on banks having more than one branch.

Otherwise, a very nice job.

Full disclosure: I took two of Stigler's classes while in gradual school at Chicago and also graded for him for a couple of years.