• With: Kim Strassel, James Freeman, Dan Henninger, Mary Anastasia O'Grady

    FREEMAN: The Democrats have to be careful here because they have a lot of incumbent, like Mary Landrieu of Louisiana. Kim has written about, she will have a problem because her basic argument to constituents is, look how influential I am in the Senate --

    (CROSSTALK)

    GIGOT: Because I'm the chairman of the Energy Committee.

    FREEMAN: I'm the chairman of the Energy Committee and I'm pushing all of the issues you care about, like allowing energy production. If Reid keeps stopping that from happening, I don't know what her argument is.

    GIGOT: All right. Thank you, all.

    When we come back, former Treasury Secretary Tim Geithner out with a new book on the financial crisis and the role he played in the bank bailouts. But is his history accurate?

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    GIGOT: Tim Geithner is out this week with a new book, his account of the financial crisis and the decision to bailout some of the country's largest banks. But is "Stress Test" a fair telling of his role in the rescue? And five years later, are we any closer to solving the problem of Too Big to Fail?

    We're back with Dan Henninger and James Freeman. And "Wall Street Journal" columnist, Mary Anastasia O'Grady also joins us.

    So, James, you reviewed the Geithner book porous this week. What's the most important takeaway for viewers?

    FREEMAN: I think for readers, they may be surprised to learn really how little this man who was at the center of the financial rescues knew about the banking and finance, had never been in banking. Although, a lot of people believe he was Goldman Sachs alum. That's kind of a persistent myth. Also, he had never been a bank regulator. His first job regulating banks was president of the Federal Reserve Bank of New York.

    GIGOT: Is the memoir itself, in your view, an accurate portrayal of what happened?

    FREEMAN: He admits to some of his failings in terms of not seeing the housing crisis coming, not understanding the banks he was regulating, not seeing the problems that Citigroup had hid outside the balance sheet. But one thing he doesn't -- he glosses over is that the bailouts begin, starting with Bear Stearns in March of 2008, he says now that -- that it was a problem because lots of other banks might have had the same problem. But we know from minutes of the Federal Reserve meetings that he actually was saying the opposite at the time, that the banks were not undercapitalize.

    GIGOT: Any Geithner defense here on the panel? Mary?

    (LAUGHTER)

    MARY ANASTASIA O'GRADY, COLUMNIST: I'm sorry. I got --

    (LAUGHTER)

    I got nothing. But, you know, one thing I would add to what James is saying is that is that his narrative of what happened goes something like, well, it was a really optimistic time in America, so no one could ever have known that this was going to come about, and when it did, myself and some other very brave people, stepped in to save the world.

    He doesn't have any -- he doesn't seem to have learned any lessons from the problem -- how we got into the problem and also how dangerous it is for, you know, five people to get in the room and have that much discretion. So that's why, going forward, he says that he likes the Consumer Protection Bureau that Elizabeth Warren, the Senator from Massachusetts, has crafted because he says that's just more of us putting ourselves into the system. That' how we are going to -- that's how we are going to make sure it doesn't happen again.

    GIGOT: Let me defend him a little bit, in the sense that I think what we had was we had a classic mania. Everybody said, hey, it's great, it's fabulous, great times are here. So they didn't want to stop the music, as it were. Then we had a classic panic, global panic, financial panic. And I think that it is difficult for anybody who is in that cockpit to be able to make right decisions when they are shooting with real money, real bullets. And I think anybody would have done much of what Geithner did.

    Where I would criticize him is before the crisis. Not anticipating it, letting cit Citibank have all of the money off balance sheet, not doing his fundamental responsibility. But in the panic, I'm not so sure anybody would have done any better.

    HENNINGER: I wouldn't disagree with that, Paul. And I think in the middle of the storm, it is very difficult to operate, for sure. What came after I think is a big problem. You know, when you have a big financial crisis like this, somebody will take the fall for it afterwards. And the bureaucracies and the regulators --

    (CROSSTALK)

    GIGOT: Then don't take the fall.

    (LAUGHTER)

    HENNINGER: The problem here that they have so overreacted by not -- they are regulating these banks now in a way that essentially is making them public utilities. As John Mack, the former head of Morgan Stanley, said to his successor, the government is your number-one client now. And that is the problem that the Obama administration has put on the financial system. They have enveloped it now, they are over regulating.

    FREEMAN: That's right. We are not just talking about history here. This is current events. This is going forward. The -- the Too Big to Fail idea that the government stands ready to rescue large banks is still with us. In fact, in the book, Mr. Geithner says that a problem with Dodd-Frank is it still does not allow enough bailout authority, as much as firepower as he would like the government to have. So and now they are proceeding to name other banks as systemically important. This idea continues.

    GIGOT: They are also still banking on the prescience of regulators to prepare us and prevent the next crisis when, of course, Geithner acknowledges that he couldn't predict the last one.

    O'GRADY: Right. That's the idea of the Consumer Financial Protection Bureau. But, you know, also, he talks about how ending Too Big to Fail is an impossibility in his mind. Government's job is to just stand by and always put out the fire using taxpayer money and all of the discretion it can muster. And that seems to me like a very dangerous lesson, considering the fact that, you know, if you look from 1971 to today, you have more and more financial crises. They are deeper and deeper and they come more frequently.

    GIGOT: All right.

    When we come back, New Jersey Governor Chris Christie raising fresh speculation this week about a presidential run. But with the Garden State's budget in shambles, could Bridgegate be the least of his problems in 2016?

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    (BEGIN VIDEO CLIP)

    UNIDENTIFIED MALE: Are you still thinking about president? When will you make a decision on that?

    GOV. CHRIS CHRISTIE, R-N.J.: Yes, and later.

    UNIDENTIFIED MALE: Later?

    (LAUGHTER)

    (END VIDEO CLIP)

    GIGOT: New Jersey Governor Chris Christie on Wednesday indicating that a 2016 presidential run is still very much on the table. But as he tries to put the George Washington Bridge scandal behind him and restore his national standing, he faces an $807 million budget shortfall in the Garden State as well downgrades from all three of the major credit rating agencies. So could New Jersey's fiscal woes sink his presidential plans?

    Mary, talk about the New Jersey miracle a while back. What happened to it?