The Financial Crisis: Timothy Geithner and the Stress Tests
In February and March 2009, the U.S. economy was in the midst of a terrifying financial and economic crisis. Between the beginning of 2008 and early 2009, four of the 25 largest U.S. financial institutions had failed, and nine of these 25 institutions had taken extraordinary steps to avoid failure—either receiving one-off government support, merging with another firm, or submitting to heightened regulation to qualify for future government support. Led by Treasury Secretary Timothy Geithner, the government had to quickly devise policies to stabilize the financial system and the economy. The case explores the details of policies, and the decision making process that led to them, that Geithner and his team devised under immense time pressure to stabilize the system. The case features an extended discussion of Geithner’s innovative “stress test,” which would reveal the longer-term health of the country’s largest banks.
Keywords: bailout; regulation; Stress Test; Financial Crisis; History; Economy; Policy; Governing Rules, Regulations, and Reforms; Decision Making; Banking Industry; Financial Services Industry; Real Estate Industry; United States;
Citation:
Hanson, Samuel G., Robin Greenwood, David Scharfstein, and Adi Sunderam. "The Financial Crisis: Timothy Geithner and the Stress Tests." Harvard Business School Case 219-038, October 2018. (Revised January 2019.) View Details