Geithner capitalism – socialize risk and keep profit private

In response to a questioner at a recent Council on Foreign Relations event, Treasury Secretary Tim Geithner, by his non-answer to a question along those lines, admitted that that is what modern capitalism is in the United States, by government understanding.

QUESTIONER: What seems to have happened recently is that whenever anyone talks about nationalizing the banks, people scream socialism. But the current administration seems to be wanting to socialize risk but keep profits private.

And that seems to be the new capitalism in the United States, where the taxpayers take a lot of the risk, but the market continues to enjoy profit, should there be any.

And, just what did Timmy G. say to this brilliant observation?

To solve financial crises, governments have to be willing to take risk, because the definition of “financial crises” is the markets are not willing to take risks that looks — otherwise would be economic.

The central fact is that governments have to be prepared to take risks the markets can’t take, for a temporary period of time, in order to get a firmer foundation for repair.

That’s my emphasis on the “can’t.” Why didn’t Geithner say “won’t” instead? This is just like a subprime mortgage buyer whom the Goldmans and AIGs (or the GOP in Congress) don’t want to bail out. The reasoning goes like this:

“If they couldn’t pay that mortgage, they shouldn’t have gotten it.”

But, shouldn’t that apply to the AIGs of the world, too?