In This Review

Firefighting: The Financial Crisis and Its Lessons
Firefighting: The Financial Crisis and Its Lessons
By Ben S. Bernanke, Timothy F. Geithner, and Henry M. Paulson, Jr.
240 pp, Penguin Books, 2019

This collaboration by the three U.S. government officials who led the fight in the United States against the financial crisis of 2008 presents a mature and revealing assessment of the genesis and dynamics of the meltdown—and of the government’s ultimate success in halting it, although not before a painful recession had set in. One of the most interesting points is that they did not want Lehman Brothers to collapse in September 2008, despite some claims to the contrary, but lacked the legal authority to prevent it. The authors also argue that the many bailouts of other financial institutions worked, as they stopped a panic that could have been much worse. In the end, taxpayers recovered much more than they paid out, and executives and shareholders lost heavily, as they should have in a capitalist system—a point that undercuts fears that the bailouts would generate moral hazard and thus lead management and shareholders to take more risks in the future. Bernanke, Geithner, and Paulson believe that the U.S. economy is much better positioned to avoid a financial crisis today than it was in 2007 but that the federal government is now less well equipped to deal with one when it eventually occurs.