Haraz N. Ghanbari/AP
Treasury Secretary Timothy Geithner testifies at a Dec. 10 hearing of the Congressional Oversight Panel on the Troubled Asset Relief Program.
Treasury Secretary Timothy Geithner testifies at a Dec. 10 hearing of the Congressional Oversight Panel on the Troubled Asset Relief Program. Haraz N. Ghanbari/AP
Pointing to signs that the economy is growing and on the path to recovery, Treasury Secretary Timothy Geithner says Americans can be more confident about their financial security, their financial future and their employment outlook.
In looking back at 2009 and the Great Recession, Geithner told host Michele Norris on Tuesday that the administration took the necessary steps to prevent the economy from entering a free fall. He also expressed confidence that Congress would enact financial reform legislation to prevent the next crisis.
Earlier in the day, the government reported that the economy grew at a 2.2 percent annual rate in the third quarter. In a year-end report, the Treasury Department noted progress since the first quarter, when the economy was shrinking at a rate of 6.4 percent.
Signs Of Confidence
Geithner said some of the signs that confidence is returning in the fourth quarter include consumers spending more, businesses investing again, stronger exports and a more stable housing market.
"These things all help — they all make a big difference," Geithner said. "But we were in a very deep hole, and it's going to take a long time to repair the damage done to confidence."
Geithner said it's important that the administration continue to work with Congress to pass financial reform legislation that can "prevent the next crisis" and build a "more stable financial system."
"But right now, the real risk we face is that banks are not lending enough and not going to provide the capital businesses need to grow for the economy to strengthen going forward," he said.
Another Financial Crisis?
So what would happen if the head of a national bank called Geithner in the middle of the night and said they needed help?
"[The] basic lesson of the financial crisis is you need to make sure that you are doing what is necessary to repair what was broke in the system," Geithner said. "And if you pull back support prematurely, then the risk is that you are going to hurt growth, unemployment will go higher." The administration, he adds, is doing everything it can to ensure that credit is made available throughout the economy.
Many people have expressed concerns that another financial crisis might result from the deterioration of the commercial real estate market or a decline in the value of the dollar.
"We're not going to have a second wave of financial crisis," Geithner said. "We'll do what is necessary to prevent that. We cannot afford to let the country live again with a risk that we're going to have another series of events like we had last year. That's not something that's acceptable."
An Erosion Of Trust In Big Banks
Many large banks benefited from billions in bailout funds that the government quickly made available to rescue them from insolvency. A majority of these institutions have repaid the government, but Geithner says they haven't gotten the message about their roles and responsibilities.
"I don't think they really do understand it fully yet," Geithner said. "I think it's very important for banks to understand that they lost the basic confidence and trust of the American people. And they have a long way to go to earn that back. And every judgment they make now going forward — in terms of how they pay their employees, how they run their institutions, how they meet the needs of their customers, how much they support this very important effort of reform across the system — is going to be important to rebuilding that basic trust and confidence."
Some critics have expressed concern about Geithner's close association with bankers over his career and in his current position.
Geithner said that when he took office, his obligation was to fix a "very broken" financial system.
"We repaired the damage caused," he said. "We had to do in that context a bunch of things that no secretary would have to do — should ever have to do. But they were absolutely necessary to make sure that we were rescuing this economy and bringing forward the time when we were going to put people back to work."
Geithner added that he spends as much time as possible speaking to businesses across the country, including small banks, small businesses and community leaders in parts of the economy that are hurt, as well as those that are doing relatively well.
"The economy would still be shrinking, unemployment would be much higher than it is today if we did not do the tough things, the hard things, the politically unpopular things to save a financial system in free fall," Geithner said.
Regarding his regular communications with executives of some of the largest banking institutions, Geithner said there's "a misperception" about this.
"Again, I'm the secretary of the Treasury," he said. "I have to spend time figuring out what it's going to take to fix the things that are broken in the financial system — that requires spending time with the leaders of the nation's major institutions. There's no way anybody could do this job without doing that."