At unpredictable and unpleasantly irregular intervals, a beep resounds through the office of a tired-looking man on the 13th floor of a building in New York’s financial district. The sound is loud and distracting and can fray the nerves. No merry jingles, no downloaded ringtones, just the beep of Tim Geithner’s cell phone.

As president of the Federal Reserve Bank of New York, Geithner, at least at this point in early April, is the man of the moment. Credit-crunched investment bankers are calling to withdraw funds from the discount window, which the Fed uses to loan money directly to banks. Nosy politicians are trolling for scapegoats. Journalists are asking what will happen next.

Everyone is calling at once, and more often than not, their questions pertain to a singular event that rocked the financial markets, the Fed-financed bailout-cum-acquisition of Bear Stearns by J.P. Morgan Chase—a desperate move played out over four hellish days in mid-March, the most significant government intervention in the financial markets since the Great Depression.

Geithner was the central figure in that drama. It was Geithner’s Federal Reserve bank, not the Treasury, that came up with the $29 billion loan that made the deal possible or, more precisely, acceptable to J.P. Morgan. Geithner brought the parties together, hashed out the details, and demanded answers when things got shaky. It was a heady role for a noneconomist who has, to put it kindly, only on-the-job training in the financial markets and who relies on an A-list inner circle. Officially, his advisers include the board of the New York Fed, which counts several heads of financial institutions as members. Unofficially, he has built an impressive career with the help of a number of kingmakers, including some with a financial interest in the industry he oversees. (See a pop-up graphic showing Tim Geithner's unofficial advisors.)

It was in this office, right here, where the Bear deal was done. During that time and in the weeks after, Geithner was getting two hours of sleep a night, and he still looks it. You might even say that this youthful 46-year-old is starting to look his age. The sudden fame clearly unnerves Geithner, a quiet sort who is described by people who know him as shy. “He does not try to blow you away, to overwhelm you,” says Henry Kissinger, Geithner’s first boss.

The Bear bailout is an ordeal Geithner is loath to repeat, even though he knows he may have to. He’s already anticipating the regulatory shifts that must be implemented if the markets are to withstand further shocks. “We’re going to need to change a whole bunch of aspects of our financial system,” Geithner says, speaking quickly and leaning forward in his chair. “We should not have a system that’s this fragile, that causes this much risk to the economy.”

The reform process has started creaking forward, with a wide-ranging (and swiftly dismissed) series of proposals by Treasury Secretary Hank Paulson. Meanwhile, Geithner has begun sending teams of examiners to the major investment banks to pore over their books and risk-control policies. Since the Bear blowup, he has also been urging bankers to boost their capital levels.

It has become something of a Wall Street parlor game to try to figure out why Geithner got as involved as he did in the Bear mess and whether he was had by crafty bankers. Geithner insists that the Bear deal benefited the public and not just the other big banks, who stood to gain from their competitor’s going out of business. (Granted, it did help the banks, assuaging fears of an industry wipeout.) The implicit message is, Weep not for Bear but for what could have happened to the rest of us if it hadn’t been saved. Geithner is impatient with—and a bit teed off by—talk that he is pushing the Street’s agenda. “The Fed’s actions in this financial crisis will benefit Main Street more than they benefit Wall Street,” he asserts. He is certain that calamity was averted and that the people who gain most from the deal are not bankers but “the family who needs to borrow money to finance a house or send their child to college, or the individual trying to build enough savings for retirement, or the worker worried about losing her job.”

That sounds like campaign rhetoric, but Geithner is an avowedly apolitical independent—contrary to the assertion of one columnist that he was an adviser to John Kerry in 2004—and has served under both Republicans and Democrats. But he’s going to have a hard time remaining above the political fray, certainly in this election year, when, given the weak federal response to the subprime-mortgage crisis, the Bear Stearns bailout may anger voters.

Questions linger as to whether Geith­ner, who’s supposed to represent the public interest, ended up with the best possible deal. He’s an experienced negotiator, having wrangled with foreign powers during his days at Treasury, but some critics contend that he may have been outmatched by Jamie Dimon, J.P. Morgan’s chief executive, and Alan Schwartz, Bear’s C.E.O.  “He doesn’t really have what you would describe as a banking or financial background. He’s never taken risk, never worked as a trader or in credit, or even had operational responsibility in a bank,” says Chris Whalen, a vocal critic of the Fed and a managing director of Institutional Risk Analytics, a consulting firm.

After the Bear deal, the Fed wound up with $30 billion in collateral, mostly in the form of subprime-mortgage securities. Even Paul Volcker, the former Fed chairman who served on the search committee that picked Geithner and who still holds him in high regard, has expressed queasiness about the way the deal was structured. In a speech to the Economic Club of New York, Volcker said the Fed took actions that “extend to the very edge of its lawful and implied powers, transcending certain long-embedded central-banking principles and practices.” Volcker later leavened this harsh assessment a bit, telling me that the Fed’s intervention “was a proper action, but it was extraordinary—something that’s never been done before, in terms of calling upon that emergency power. It tells you how seriously they took it.”

Still, misgivings about the deal are hard to ignore, no matter how catastrophic the consequences of not intervening might have been. It doesn’t help that the deal is teeming with connections that are sure to raise questions. Dimon is one of the three class-A directors of the board of the New York Fed, and its head is Stephen Friedman, a former Goldman Sachs chairman, who still sits on the investment bank’s board. The New York Fed’s board also includes Richard Fuld of Lehman Brothers, a firm that is another oft-rumored potential candidate for a bailout. Fuld is a class-B director, meaning that he is elected by member banks, astoundingly, to represent the public. (Friedman is also supposed to be looking out for you: He was “appointed by the board of governors to represent the public.”) Thus Geithner reports to a board that is composed of people who are not only under his purview but would also benefit from any potential bailouts. The structure of the New York Fed’s board bears more than a passing resemblance to that of the New York Stock Exchange in the bad old days, when member firms, regulated by the N.Y.S.E., were heavily represented on its board.

Even more intriguing is Geithner’s informal brain trust, loaded with Wall Street luminaries. Since coming to the Fed in November 2003—recruited by then-New York Fed chairman Pete Peterson, co-founder of the Blackstone Group—Geithner has learned the ways of the financial industry at the feet of some of its biggest legends. He was almost immediately taken under the wing of Gerald Corrigan, a gregarious former New York Fed chief who is now a managing director of Goldman Sachs. Corrigan describes his relationship with Geithner as close, and it has flourished since Geithner’s first days at the Fed. Another frequent adviser—“you don’t want those things to get too formal,” Corrigan notes—is also a preeminent banker, Merrill Lynch C.E.O. John Thain, a Goldman alumnus and former head of the N.Y.S.E.  Over the years, Thain has often talked to Geithner—“sometimes I talk to him multiple times a day,” Thain says. Geith­ner’s network also includes former Fed chairman Alan Greenspan, an old acquaintance, as well as the heads of the European central banks, hedge fund managers, academics, and his immediate predecessor, William McDonough, architect of the 1998 Long-Term Capital Management bailout and now a vice chairman of Merrill.

Geithner’s link to Corrigan will be especially crucial in the months ahead. Corrigan was recently asked by a presidential policy group to form a panel charged with finding ways to protect the financial system. The group is expected to release its findings by the end of July—a rapid but necessary pace if the Street is to have an effective voice in whatever may be done to tamp down risk.

One way of looking at these relationships is that they put Geithner in the loop with people he must know if he is to get a handle on the maddeningly complex financial markets. Corrigan has decades of experience at the Fed and on the Street, and Thain, recently brought to Merrill after the firm wrote down billions in subprime losses, is one of the leading experts on mortgage-backed securities and other intricate financial instruments. You could even make a case that Geithner would be falling down on the job if he didn’t keep in touch with the Thains and Corrigans of the world. “People don’t understand how important those relationships are, especially when you’ve got to deal with complex and difficult situations,” Corrigan says. “Relationships are critical, and Tim has done a terrific job of developing those relationships.”

Corrigan says that they “talk about everything under the sun,” except for monetary policy. “He brings in groups of people. That includes, at times, some of his old Treasury buddies,” like former secretaries Larry Summers and Robert Rubin. “As I said, he has really worked at this networking thing I keep talking about.”

Of course, these aren’t exactly chitchats among people who meet casually at some South Street Seaport bar after work. This is networking between a central banker and the heads of the capital-hungry investment firms over which he holds sway. You might argue that Geithner’s relationship to his charges is even closer than the typical regulator’s. No other regulatory agency is in a position to loan crucial billions to the entities it monitors.

Certainly, Geithner’s friendship with Thain and Corrigan can’t do Merrill and Goldman any harm. One intriguing aspect of the Bear bailout—Geithner’s selection of BlackRock to help the Fed value Bear and then manage the $30 billion in collateral—draws attention to these relationships. Merrill owns 49 percent of BlackRock, which was spun off years ago from Peterson’s Blackstone Group. California Democratic representative Henry Waxman, chairman of the House Committee on Oversight and Government Reform, has asked Geithner to explain how BlackRock got the job, noting that such contracts are usually secured by a competitive bidding process. Geithner told the Senate Banking Committee on April 3 that the selection of BlackRock, which he described as a “world-class adviser” of exceptional expertise, took place amid helter-skelter decisionmaking at the time the deal was being worked out. He said that the compensation of BlackRock, whose board of directors includes Thain, had yet to be determined.

More broadly, the value of the bailout to taxpayers was a theme of the grueling four-hour interrogation of Geithner and other officials by the Senate Banking Committee. Again and again, the senators questioned whether the interests of Bear or the public were being served, and the adequacy of investment bank oversight was the subject of unusually close questioning. While the hearing seemed very civilized—the witnesses were not even sworn in—it rated a solid 6 on the congressional tension-meter, with 1 being an opening prayer and 10 being the Army-McCarthy hearings. Fed chairman Ben Bernanke, Treasury undersecretary Robert Steel (Paulson was conveniently in China), and Securities and Exchange Commission chair­man Christopher Cox also testified.

But it was Geithner who had the chore of providing the nitty-gritty, and he bore more than his share of the most pointed questioning. He was scolded, lectured, and interrupted, much like a doctoral candidate who had just presented a weak defense of his dissertation. “Should I try—can I just go through a few important things for the record,” he pleaded at one point in the midst of a barrage of hectoring by Republican senator Jim Bunning, of Kentucky. The New York Times splashed his beleaguered likeness at the top of the front page the next day, with Geithner staring down at the witness table, hand on head, lips pursed, as if saying to himself, “Why the hell did I take this job?”

It's a fair question, and so is this: How did a career technocrat become the king of Wall Street, capable of blessing mergers, starving unworthy firms of cash, and, if one believes the not-unpersuasive official narrative, saving the markets from ruin? The Fed is arguably the least transparent of the financial regulators, and although the Fed itself was created by an act of Congress in 1913 and the chairman of the Fed is a presidential appointee, pretty much everyone else wielding any power is a product of a kind of old-boy network. The presidents of the regional Fed banks are appointed by their nine-member boards of directors, with six seats on each board selected by member banks and the other three by the Federal Reserve’s board of governors.

So in a purely anthropological sense, lack of experience in banking or with the Fed notwithstanding, Geithner was a perfect choice. He was a child of the perma-establishment—born not with a silver spoon in his mouth but with a briefcase tucked under his arm. His father, Peter Geithner, worked for the U.S. Agency for International Development in Africa and Washington before joining the Ford Foundation, where he spent 28 years, holding senior posts in Asia. Tim spent his formative years in Japan and other points east, attending elementary school in New Delhi, where he lived in the upscale New Friends Colony, and he graduated from the International School in Bangkok. From there, he followed in his father’s footsteps to Dartmouth College, then to Johns Hopkins, from which he received a master’s in international economics and East Asian studies in 1985. Soon after, he married a Dartmouth classmate, Carole Sonnenfeld, and they now have a son and a daughter.

Since college, he has gone pretty much straight up the ladder—no detours, no backpacking around Europe, no internship fetching coffee. And every step of the way, his accomplishments and mastery of the details of international finance have been recognized. He has always had what used to be known in the New York Police Department as a rabbi—a high-level official who promotes a person’s career. In his first job, with Kissinger Associates, he worked directly for Henry Kissinger, researching a book. “He did such good work that I still have some of the papers, for another book I may write,” Kissinger says. Then, when Geithner went to the Treasury Department, he held a variety of lower-level positions, including assistant attaché at the U.S. embassy in Tokyo, before being plucked from the great amorphous mass of aspiring civil servants by Larry Summers, then Treasury undersecretary for international affairs, and named his special assistant. With Summers as his backer, he was moved to positions of increasing responsibility, beginning with deputy assistant secretary for international monetary affairs. “He stood out as being in an entirely different league,” Summers recalls. By Summers’ account, Geithner avoided a certain occupational hazard for some young strivers—brownnosing—and spoke his mind. “The ego is disengaged, but he’s very comfortable with himself and very direct—not promoting himself, but just concerned with doing the right thing,” Summers says.

Evidently that was something of a magic formula, as Geithner climbed through the bureaucracy, holding jobs with titles like senior deputy assistant secretary of the Treasury. In the department’s complex hierarchy, the simpler the title, the greater the power. Geithner soon emerged as assistant secretary, then in 1999, undersecretary for international affairs, Summers’ old job. In the interim, Geithner acquired a reputation as a man to be trusted with tough jobs. He negotiated the 1995 U.S.-Japan financial services agreement and served as U.S. negotiator for a 1997 World Trade Organization financial services agreement. Every step of the way, Geithner proved his precociousness. “He was smarter, and he saw problems in much more holistic ways” than his peers did, Summers says. “He was able to see the problem from the perspective of the secretary or the president, who had to decide from the point of view of a wide variety of considerations.”

Geithner truly earned his international-finance stripes during the emerging-markets troubles of the late 1990s—the tumult that led directly to the meltdown of L.T.C.M., which established a template for the Bear Stearns fiasco. “That whole period was one long crisis,” Greenspan recalls, and that was when Geithner proved his mettle in the eyes of the Fed chairman. Geithner showed a “general understanding of the nature of what the problems were and what was required to right the system,” Greenspan says, echoing Summers’ praise.

Geithner’s shining moment came as he negotiated assistance packages for Brazil, South Korea, Thailand, and other teetering countries, helping assemble more than $100 billion in international aid. At the time, the packages raised concerns similar to those surrounding the Bear Stearns bailout, and they elicited much the same defense. But despite the misgivings, Geithner, Summers, and Treasury undersecretary David Lipton were able to contain the now nearly forgotten crisis—only forgotten, mind you, because the bailout was a success.

Geithner moved to the International Monetary Fund near the beginning of the Bush administration but did not stay for long. When McDonough left his post as chief of the New York Fed in 2003, Geith­ner’s name was floated for the job. With his accomplishments in Asia, he was a shoo-in. A long procession of prominent career advisers dating back to the ’80s, all singing his praises, didn’t do him any harm either. “When his name appeared as a potential candidate, my attitude was ‘Let’s get him before somebody else does,’ ” says Greenspan, who was still chairman of the Fed at the time. Peterson, who led the search committee as well as the board of the New York Fed, recalls that the only possible qualm about Geith­ner related to his reserved demeanor, his “quiet, diffident personality.” Summers put that notion to rest, according to Peterson, saying, “I don’t think I’ve ever had anyone working for me who, when he disagreed with me, could do it with such direct, unambiguous, and even colorful language.”

Starting out as president of a Federal Reserve bank, Geithner had a friend who was more than eager to help him—the ever-solicitous Gerald Corrigan of Goldman, who recalls, “When Tim got to 33 Liberty Street, he, like most of his predecessors, faced a steep learning curve regarding financial markets.” But, Corrigan hastens to add, “he has worked very, very, very hard to develop that sophistication, and I think that he has done an absolutely terrific job.” (The diplomatic John Thain claims, incongruously, that he doesn’t “remember well enough back to 2003 and 2004” to address the extent of Geithner’s market knowledge when he was starting out at the Fed.)

From the start, Geithner made significant efforts to address systemic risks in the markets, particularly those caused by derivatives. Geithner pressured banks to halt the pernicious practice of assigning their derivatives contracts to risky hedge funds without notifying counterparties. He also worked with the S.E.C. and foreign regulators to persuade firms to improve their general risk management and tighten lending practices for hedge funds. It’s likely that the recent market troubles would have been a lot worse had these measures not been taken—and that the hedge fund implosions that have accompanied the subprime crisis would have been a lot messier than they were.

The wedding of Bear Stearns and J.P. Morgan was undertaken strictly for the money and definitely—definitely—not for love. There are varied opinions as to whether Bear got what it deserved. Bear was the bank known for its “what’s in it for me?” supertraders, the one that had refused to participate in the Fed-sponsored bailout of L.T.C.M. but was now the cause of an even more dramatic federal intervention. Here the tables were turned, and the rapacious bankers and traders were painting themselves as the victims. The spectacle of the C.E.O. of Bear, one of the most aggressive trading houses in history, claiming to be a victim of foul play has to be one of the richest ironies of this crisis.

A reasonable case can be made that Bear might have survived if the discount window had been opened to investment banks earlier, as Bear execs have claimed. Had that happened, “I think you very likely would still have Bear Stearns as a separate entity,” says Roel Campos, who recently left his post as an S.E.C. commissioner. Instead, Bear is being taken into the J.P. Morgan fold in a way that ensures pain for Bear shareholders. That’s largely because of Paulson, who pushed for a bargain-basement price, lest other bankers start to believe that Uncle Sam will bail them out if they continue to take huge risks.

“It would have been nice if the Fed could have done something to prevent that from happening, but since they couldn’t or didn’t, I guess that at the time the crisis arose, I would have done the same thing,” says William Seidman, former chairman of the Federal Deposit Insurance Corp. and an architect of the savings-and-loan rescue in the 1980s. “I used to say that there’s no bank regulator born that will allow a major financial institution to collapse on his watch.”

Paulson’s concern about the share price reflects his fear of creating what economists call moral hazard. The concept can be understood this way: As long as Mom and Dad will bail them out, misbehaving kids will continue to act as if there are no consequences to their actions. To prevent that, Paulson urged that the deal be consummated as cheaply as possible, initially at the humiliating price of $2 a share. Even though the J.P. Morgan bid was raised to $10 a share, that’s a flyspeck compared with the $171 that Bear stock was commanding in January 2007. (In Senate Banking Committee testimony on April 3, the Treasury’s strong-arming was delicately referred to as offering “perspective.”) Paulson’s presence in the deal resembles the placement of his name on the front of a dollar bill: Even though the words "Federal Reserve Note" appear in bold letters at the top, Paulson’s signature is still prominent.

One of the most discussed topics during the crisis was why Geithner was involved in the first place. The Fed, despite its broad financial oversight, does not have authority over investment banks—either to audit their books or lend them money. When Bear finally got its loan, via J.P. Morgan, it was through emergency authority that had rarely been invoked since the Depression. The day-to-day task of overseeing investment banks falls mainly to the S.E.C., but the agency’s primary job is not to ensure that banks operate in a way that won’t cause a meltdown but to enforce its mandate to protect investors.

At the end of the day, Congress will have to increase the Fed’s powers if it is to get a handle on risk-taking among investment banks. “I’m not clear how the Fed becomes a regulator of risk without regulating the institutions that take the risk,” says Seidman, the former F.D.I.C. chairman.

Still, no amount of eagle-eyed regulation can substitute for the power of a marketplace in which no one is willing to do business with a firm anymore. That was certainly the situation Bear found itself in. Geithner testified at the Senate hearing that he would probably not have been comfortable lending money to Bear earlier than he did, “given what we knew at the time.” After all, he said, “we only lend to sound institutions.” It was a jab at Schwartz, who testified a few hours later that “the firm was adequately capitalized and had a substantial liquidity cushion” but was a subject of “unfounded rumors” that caused a run on the bank. Under questioning, he accepted some blame for his own firm’s going belly-up, but it was clear that he didn’t have his heart in it. Indeed, the senators seemed so taken by his story, solicitously homing in on his rumors excuse, that none of them was discourteous enough to push Schwartz on why Bear took such risks with its capital and why it didn’t reduce its risk exposure or raise more capital than it did before the roof fell in.

It was also a slap in the face to the man sitting a few feet to Geithner’s right, S.E.C. chairman Cox, who had told the media on March 11 that the S.E.C. was “reviewing the adequacy of capital at the holding-company level on a constant basis, daily in some cases,” adding, “We have a good deal of comfort about the capital cushions that these firms have been on.” There’s a big difference between a company that’s not sound enough to borrow from the Fed’s discount window and one with a sufficient capital cushion.

In fact, it’s not at all clear that Bear would have survived if the discount window—opened to the Fed’s primary dealers, including some investment banks, by emergency authority on March 16—had been opened to Bear and other investment banks a few days earlier. According to a person with knowledge of Bear’s financial condition at the time, the firm had a far riskier financial profile than other banks, with an excessively heavy exposure to mortgages. The central issue, he contends, is that if “Bear hadn’t put itself in a position where it was vulnerable to this kind of run, none of this stuff would have been necessary. That was the overwhelming, dominant cause of those events. They were left on the edge of insolvency with no options.”

Indeed, Schwartz’s beef, though it appears to have been taken seriously by the S.E.C., reeks of the way C.E.O.’s of money-losing companies routinely blame short-sellers for their own mismanagement. In the end, this once-domineering firm has gone out not with a bang but with a whine.

Geithner believes that a regulatory framework is needed in which “the basic rules of the game establish stronger incentives for building more robust shock absorbers.” That’s a good idea, but so far it’s as feasible as building a Dairy Queen on the far side of the moon. Even with more stringent regulatory safeguards, not even the best system can prevent firms like Bear from taking on too much risk, any more than it can prevent investors from borrowing too much. Nor could it have kept Bear from clearing trades for boiler-room operations in the ’90s, a practice that tarnished its image and caused one of its senior executives to be barred for life from the securities industry.

This hurricane will blow over, but there’s precious little that can be done to stop another from coming. The next storm will undoubtedly involve financial instruments that are under the radar today, and it will be caused by the choices of yet another set of overreaching bankers or traders. Then it may take more than even Tim Geithner to clean up the mess.

Uncle Sam to the Rescue

The Federal Reserve has taken a number of steps to slow the economy’s decline:
Opening its discount window to major investment banks—loaning an average of $28 billion a day.
Offering short-term loans of up to $50 billion to deposit banks through biweekly auctions.
Backing $30 billion in Bear Stearns debt.
Cutting the target interest rate by 2 percentage points since the beginning of 2008.