Geithner’s Mea Culpa

Learning from your mistakes is a hallmark of Western scholarship. It also characterizes Chinese thought.

The Confucian thinker Mencius once praised a fellow scholar: “When someone points out a mistake [he] has made, he is happy.” So Tim Geithner, student of the East, should be really happy now.

Last week Secretary Geithner admitted that as Vice-Chair of the Fed he presided over policy that was too loose for too long. This helped fuel “reaching for yield” that pumped excess liquidity into risky assets and excerbated the boom (and bust) in housing. The Secretary’s confession is extraordinary, in that the other high priests of the Fed have consistently blamed investment bankers and billion-dollar hedge funds for the global credit glut.

The lifetime public-servant thus sets a powerful example for other rule-makers in Washington. When a policy is wrong, abandon it. Learn from your errors, and move on. If only more leaders would adopt the wisdom of confession, contrition, and correction.

Douglas R. Tengdin, CFA
Chief Investment Officer
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