Are financial crises an inevitable feature of capitalism? Must the government rescue the system when huge crises occur? In his book Stress Test, Timothy Geithner, president of the Federal Reserve Bank of New York and US Treasury secretary during the 2007-09 crisis, answers “yes” to both questions. Yet these answers also harm the legitimacy of a market economy. It is bad enough if capitalism is crisis-prone. It is worse still if the state feels obliged to rescue those whose folly or criminality caused the damage, to protect the innocent.

Mr Geithner argues not only that crises are sure to recur but that governments must react with overwhelming force. The only way to stop a crisis is to remove the circumstances making it rational to panic. That means the government must borrow more, spend more and expose taxpayers to more short-term risk – “even if it seems to reward incompetence and venality, even if it fuels perceptions of an out-of-control, money-spewing, bailout-crazed big government”. This is a bald statement of an unpopular view.

Sheila Bair, head of the Federal Deposit Insurance Corporation during the crisis, has given an opposing view, arguing that if Wall Street believes the government will always pick up the tab for disastrous bets, instability will be the inevitable result. Mr Geithner’s justification of the bailouts only makes sense, she says, once you accept a false dilemma: “That our only choices were either to do nothing or to pursue the over-the-top measures which we did.”