Comes now Timothy Geithner, treasury secretary from 2009 to 2013, to tell you that much of what you “know” about Dodd-Frank — Congress’s response to the 2008-2009 financial crisis — is wrong. It’s a timely review because the Trump administration is promising to overhaul the law. The title of Geithner’s essay, carried in the current issue of Foreign Affairs, is simple: “Are We Safe Yet?” The answer is not so simple.

Start with good news. Like many others, Geithner — a critical player in containing the breakdown — doubts the United States faces “a major [financial] crisis anytime soon.” To justify this, he offers both statistics and common sense.

Since 2008, U.S. banks have raised roughly $500 billion in new shareholder capital, bringing the total to $1.7 trillion. The added capital provides a larger cushion against losses (and, of course, the new shareholders enjoy any profits). This bolsters confidence that the system can survive unexpected setbacks.

In addition to more capital, banks also have a more stable base of funds used for lending. According to Geithner, deposits now represent 86 percent of U.S. banks’ liabilities, up from 72 percent in 2008. Deposits tend to be stable, because most are insured by the government (up to $250,000 by the Federal Deposit Insurance Corp.) During the crisis, the flight of uninsured short-term funds (so-called repurchase agreements and commercial paper) threatened the entire financial system. Now this danger is reduced.

The result is a strengthened banking system. “Today, the major U.S. banks could probably sustain losses greater than those experienced in the Great Depression and still have enough capital to operate,” Geithner writes.

Psychology reinforces these changes. It has shifted toward caution. “The memory of the global financial crisis still looms large,” Geithner observes. “In a way, this should be reassuring. A world worried about the approaching abyss is safer than a more sanguine one, such as in 2006.” Loans may be harder to get; but they’re also more likely to be repaid.

Still, Geithner serves up much bad news. His essay is organized around four unhappy propositions.

Proposition No. 1: A financial crisis “is certain at some point” — we just don’t know when and how bad. Conditions change. Memories fade. Government regulators aren’t superhuman. They can’t “protect against every conceivable bad event.” They also face a dilemma: If regulations are too tough, they will cause “some financial transactions to shift away from banks and toward less regulated institutions.”

Proposition No. 2: A true crisis is “not self-correcting.” Most declines in markets (for stocks, bonds, loans) are self-limiting. Prices drop to levels that buyers think are a bargain. Not so with a panic. Selling pressures reflect fears that tomorrow’s prices will be lower than today’s. The resulting “fire-sale prices . . . make large parts of the financial system appear to be insolvent.” Someone or something must intervene to stop the spiral.

Proposition No. 3: In a panic, only the federal government can mobilize the needed financial resources “to preserve the functioning of the credit system necessary for economic recovery.” In the 2008-2009 crisis, the government provided trillions of dollars of aid through money creation by the Federal Reserve and by Treasury borrowing. Absent this torrent of emergency credit, it’s not clear what would have happened.

Proposition No. 4: Despite this, Dodd-Frank has crippled government’s ability to defuse future financial crises. It has restricted government’s “ability to act as a lender of last resort.” The Fed’s power to lend to individual institutions is curtailed, making it harder to nip future crises in the bud. The Fed can’t act until many institutions are in trouble. Consequently, we are “even less prepared to deal with a crisis” than in 2007.

This, of course, is madness. But it is madness with a political logic. The lesson that much of the public took from the financial crisis is that banks, and Wall Street in general, were “bailed out” and that this rescue was a bad thing. So Dodd-Frank became a vehicle for making sure this never happened again by weakening the Fed and other arms of government to deal with financial crises.

The real Dodd-Frank scandal is that this misinterpretation of events, widely embraced by both parties, has been allowed to stand. In many bailouts, banks’ shareholders suffered huge losses or were wiped out; similarly, top managers lost their jobs. The point was not to protect them but to prevent a collapse of the financial system.

If the Trump administration doesn’t repudiate the conventional wisdom and change the law accordingly, it risks creating a future, self-inflicted wound. Suppose it is 2028, and the Fed is coping poorly with a huge financial crisis. Someone asks, “What were our leaders thinking when they revoked so many of its powers?” And the answer will be: They weren’t.

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