Barely two months after Mr. Wolin moved into his White House office, Mr. Geithner recruited him to serve as Deputy Secretary of the Treasury. Over the following weeks and months, the three of them convened with a large circle of other economic experts to nudge the economy away from the edge of collapse. “By that summer (2009), we had not only averted a depression, our economy had started growing again,” Mr. Geithner wrote in his 2014 memoir, Stress Test. “House prices stabilized. Credit markets thawed. And our emergency investments would literally pay off for taxpayers.”
How might a leader of that rescue view the ongoing coronavirus-induced crash? To ask that and other questions, Brunswick Review Editor Kevin Helliker called his boss, Mr. Wolin, now CEO of Brunswick Group, and they held a video conference from their respective homes.
It’s worth noting that Brunswick isn’t Mr. Wolin’s first stint in the private sector. Before joining the Obama Administration, Mr. Wolin served as President and COO of the property and casualty insurance companies of The Hartford Financial Services Group.
Also worth noting is the statement that President Obama issued to the Washington Post upon Mr. Wolin’s departure from the Treasury in 2013. Mr. Obama said that Mr. Wolin’s “deep knowledge and excellent judgment helped us … pass tough new Wall Street reform, strengthen our financial system, foster growth here at home, and promote economic development around the world.”
What is your level of alarm today compared with the darkest days of 2008/2009?
In many respects, it’s higher. Then, we had a financial crisis that bled into the real economy. Many financial institutions and other companies were under great pressure.
Now, we have a much more complicated, much more uncertain set of circumstances. You can see just by looking in your newspaper every day the extent to which the basic rhythms of life have stopped. People aren’t traveling, they’re not aggregating, not interacting, they’re not transacting.
These factors have caused a level of uncertainty and anxiety that is, in many respects, unprecedented, and certainly greater than what we felt in the autumn of 2008, or spring of 2009. Those were obviously scary circumstances, in the sense that markets were not functioning properly. But here the disruption is more broadly gauged across the entire economy. The things that we have long taken for granted are no longer taken for granted. And there isn’t a strong sense when, if ever, there will be a return of what we used to call normal.
What are your thoughts about the US government’s relief and stimulus packages?
In moments like this, the most important thing is to attack the problem with overwhelming force. That’s the lesson from 2008–2009. That’s the lesson frankly from all economic crises. That response should make sure that people and businesses are, as much as possible, able to meet their financial obligations and that people aren’t losing their jobs unnecessarily. And central banks should use monetary policy to ensure liquidity.
In this case, Congress’s $2 trillion package is helpful. It’s got the right basic pieces: support to individuals, many of whom will be worried about meeting their obligations if they lose their jobs; support for businesses small and large, and also for important sectors of our economy.
The Fed has made clear that they will respond with overwhelming force to provide liquidity and financing to large businesses, small businesses, the treasury markets and also the municipal markets.
The 2009 response was complicated by the need to bail out some of the institutions that had contributed to the crash. By comparison, the cause here is simple—a pandemic, an act of God—so there’s far less finger pointing in regard to cause. Does that difference make it any easier logistically or politically to identify the path forward?
I don’t think so. This is a unique circumstance in our history, in the sense that it’s not just isolated to a particular piece of the markets, or a particular piece of the real economy.
Suddenly everyone is staying in their homes, demand is falling dramatically, and the effect will be a generalized collapse of demand in our economy. We don’t know the basic trajectory of the public health crisis. We don’t know how long it will continue. We don’t know how many people will be ill. We don’t really have a strong sense yet of the level or the speed or the persistency of the economic dislocation.
All those things make responding to this particular circumstance very, very complicated, indeed.