Geithner Says U.S. Aims To Bolster Banks As the Treasury began a series of stress tests Wednesday to gauge the soundness of the nation's biggest banks, Treasury Secretary Timothy Geithner said he wants to ensure that they will have enough money to "withstand a more challenging economic environment."
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Geithner Says U.S. Aims To Bolster Banks

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Geithner Says U.S. Aims To Bolster Banks

Geithner Says U.S. Aims To Bolster Banks

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MICHELE NORRIS, Host:

This is ALL THINGS CONSIDERED from NPR News. I'm Michele Norris.

MELISSA BLOCK, Host:

And I'm Melissa Block. Today, the treasury department filled in details on its plan to strengthen the U.S. banking system. The key piece is the series of stress tests to reveal just how strong America's banks are. Treasury Secretary Timothy Geithner spoke with NPR's Adam Davidson about these tests. And Adam joins us now. Adam, this crisis has been going on for sometime now, about a year and half. The government has had regulators embedded in the country's biggest banks. How much more do they need to know about how healthy they are?

ADAM DAVIDSON: Yeah, that's exactly what I wanted to ask the treasury secretary. It is a bit odd for a crisis that started at least in 2007 - the idea that the government still has more work to do to find out the state of the banks. I asked the treasury secretary and he said yes, you're exactly right. Melissa, there are bank examiners who've been looking over things for a long time.

TIMOTHY GEITHNER: You know, anybody running a major institution - any supervisor - systematically does things they call stress tests are an integral part of what these banks do and what supervisors do. But what we want to do is to bring a more realistic, a more conservative, more consistent, forward looking assessment. So that we are confident that these institutions are going to have the resources necessary to withstand the more challenging economic environment. And to do that, we're going to make sure that they have support from the government - in terms of capital from the government - where that is necessary.

BLOCK: Well, sounds like the treasury secretary there is hoping these tests show the banks are in good shape. But what happens if they're not, Adam? What can the government do to make the banking system stronger?

DAVIDSON: Isn't there basically three buckets of money: Shareholders, debt holders and taxpayers? And you've, basically, got to pour the money out of one of those buckets. You've got to pick - and it seems like we're picking the taxpayer.

GEITHNER: You mean - no, I don't think that's right. What we're trying to do is to make sure that we solve the crisis at least cost to the taxpayer with the best gain, in terms of getting credit flowing again when - and the system stronger for the future.

BLOCK: And Adam, what's the plan if the banks are in bad shape?

DAVIDSON: Outside of the government, in the world of economists and market analysts, there's a vigorous debate and - as you know - one of the big words we keep hearing is nationalization. And there is a growing number of people who think that that is absolutely necessary. And that's where we are headed - that the U.S. government is going to have to takeover some big banks. There are other people who disagree. What struck me is in this conversation Secretary Treasury Geithner refused to even use the word nationalization. He talked about the other strategy and made very clear that is not his strategy.

BLOCK: It dare not speak its name.

DAVIDSON: It dare not speak its name, exactly.

BLOCK: NPR's Adam Davidson, thanks very much.

DAVIDSON: Thank you.

BLOCK: And to hear our entire interview with Secretary Geithner go to our planet money podcast at NPR.Org/money.

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