In September 2005, Timothy Geithner made one of his most visible moves as a supervisor of the U.S. banking system. He summoned the nation’s top financial firms and their regulators to streamline an antiquated system that threatened Wall Street’s boom.
Billions of dollars worth of financial instruments known as credit derivatives were being traded daily, as banks and investors worldwide tried to protect against losses on increasingly complex and risky financial bets. But the buying and selling of these exotic instruments was stuck in a pencil-and-paper era. Geithner, then head of the Federal Reserve Bank of New York, pressed 14 major financial firms to build an electronic network that would cut backlogs and make the market easier to monitor.
Geithner’s summit, held at the New York Fed’s fortress-like headquarters near Wall Street, was a success. By fall 2006, the new system had all but eliminated the logjam, helping derivatives trade more efficiently. One financial industry newsletter honored Geithner as part of a “Dream Team” for his leadership of the effort.