Shahien Nasiripour’s article about how close Citibank was to bankruptcy in November 2008 makes for pretty good reading. But the most significant part comes well into the story, when Tim Geithner drops some truth. Regulators throughout the SIGTARP report say they made “judgment calls” on how best to handle Citi’s problems; judgment calls, I might add, that always militated toward saving the bank. Geithner basically says “So it goes”:

Treasury Secretary Timothy Geithner, who effectively oversaw Citigroup as the then-president of the Federal Reserve Bank of New York, told SIGTARP during an interview last month that it’s not possible to create effective, objective criteria for evaluating the risk a financial firm poses to the system.

“It depends too much on the state of the world at the time,” Geithner said Dec. 21. “You won’t be able to make a judgment about what’s systemic and what’s not until you know the nature of the shock.”

Geithner added that lenders would simply “migrate around” whatever objective criteria policy makers developed in advance.

Taxpayers may once again have to support failing financial firms based on gut instinct alone.

“In the future we may have to do exceptional things again if we face a shock that large,” Geithner said, according to the report. “You just don’t know what’s systemic and what’s not until you know the nature of the shock.”

This just proves how silly it is to expect safety by creating a “systemic risk council,” one headed, I might add, by Tim Geithner. He basically applies the Potter Stewart principle to systemic risk, saying that he’ll know it when he sees it. And somehow, I’d guess that he’ll see systemic risk in any big bank that goes down.

In other words, you can expect taxpayer money to be committed down the road to major financial firms, to nurse them back to health. The SIGTARP report determines the Citi rescue a qualified success, because of taxpayer profits from the investment (again, not hard to make a profit when you get lent money at zero percent and buy safe instruments at three percent), but it constantly emphasizes the ad hoc nature of the rescue. Just because everything fell into place shouldn’t comfort anyone. And Geithner, essentially, is saying that will happen again, with the only difference being Dodd-Frank provides them with “more tools.”

If the rescue of a firm depends on the particular circumstance, then, and there’s no judgment to be made about systemic risk until the risk is upon us… why have a systemic risk council? And why claim it will reduce risk to the overall system?