Geithner Voices Confidence About Economic Rebound Pointing to signs that the economy is 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. But he says the real risk is that banks won't lend enough to businesses to help strengthen the economy.

Geithner Voices Confidence About Economic Rebound

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From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.


I'm Robert Siegel.

And now the secretary of the Treasury this year began as one with the U.S. and global economy on the precipice. Major financial institutions were collapsing, stock markets had lost trillions, the housing market was devastated and millions of Americans were losing their jobs. Well, that was the grim reality that Timothy Geithner confronted as he began his days as Treasury secretary. A year later, the economy is showing some tentative signs of rebounding.

NORRIS: Joining us now is Treasury Secretary Tim Geithner. So glad that you made time for us.

Secretary TIMOTHY GEITHNER (Department of Treasury): Nice to be here.

NORRIS: I'd like to begin by getting you to explain something that you actually said. I'm just going to look down for a minute because I want to make sure that I get it correct. You said that this is a year that began with America facing the risk of a second Great Depression, but is ending with America on the road to recovery. The road to recovery. Now, for a lot of people that recovery still feels like it's somewhere off in the distance. Why should people on Main Street feel as confident as you are?

Sec. GEITHNER: The economy is growing again. The policies the president put in place are helping lay the foundation for growth and job creation. And everything we're focused on doing is try to bring forward the time where the economy is creating jobs again. People are going back to work. People can be more confident about their financial future, their financial security. And I think Americans can be more confident in that. If you look carefully at what you see about consumer confidence surveys, surveys of business confidence, if you see how people are behaving again now, you see confidence starting to come back.

NORRIS: What are you saying, what is that people are doing makes you feel confident?

Sec. GEITHNER: You see people spending more, businesses starting to invest again. Growth looks like it's accelerating down the fourth quarter. You see broader based improvement, expectations and orders are increasing again. Exports are a little stronger now, housing is more stable. These things all help. They all make a big difference. But, you know, we were in a very deep hole, Michele. It's going to take a long time to repair the damage done to confidence.

NORRIS: You know that businesses are spending again. The administration has been asking the banks to try to free up more money for small business in particular. And I want you to help me understand something because on one hand the administration is telling the bankers that they need to take fewer risks, that they need to deleverage, that they need to have higher capital reserve. And at the same time you're also telling them that they need to lend more money. Those two things don't seem to square.

Sec. GEITHNER: It is very important that we work with Congress to pass legislation that can put in place financial reforms that can prevent the next crisis. So it's pretty important in the future we build a more stable financial system. We constrain risk taking in the future. 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.

NORRIS: So it's okay for them to take risks right now?

Sec. GEITHNER: Absolutely. Right now the real risk is that the pendulum having been too soft and easy on the lending side. Right now the risk is that banks overcorrect or that supervisors overcorrect. And that's something we need to work against, lean against, because, again, the strength in recovery will depend in part on credit being available to businesses across the county.

NORRIS: If a bank were to call your office or call the federal government at this point and say, listen, we're in a lot of trouble, we need help right now, what do you imagine your response might be - and say it's a large bank and they could take a lot of people down with them?

Sec. GEITHNER: A basic lesson of financial crisis is you need to make sure that you are doing what is necessary to repair what was broke in the system. And if you pull back support prematurely, then the risk is you're going to hurt growth, unemployment will go higher. A lot of countries made that mistake in the past, we're not going to make that mistake. So we're going to do what's necessary to achieve that.

NORRIS: You know, pardon me for presenting you with all these doomsday scenarios, but as you know, many people are worried about a second wave of systemic crisis, that either because of commercial real estate or the value of the dollar...

Sec. GEITHNER We're not going to have, Michele, a second wave of financial crisis.

NORRIS: You're that confident? You're certain of it.

Sec. GEITHNER: 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 is acceptable. And we will prevent that. We will do what is necessary to prevent that, and that is completely within our capacity to prevent.

NORRIS: You're saying you're confident that it won't happen. What levers can you press or pull to make sure that does not happen again?

Sec. GEITHNER: As people saw, when you have the will to act, we have substantial ability to prevent that, and we'll do what's necessary.

NORRIS: What about the banks? Do they understand their role in leading up to this crisis? And do they fully understand the responsibilities going forward? I ask because...

Sec. GEITHNER: I don't think they really do understand it fully yet. 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.

NORRIS: This administration has done a lot of finger wagging when it comes to the banks. The president has referred to them as the fat cat who are too generous with themselves. What do you say to people who feel that you're too close to too many of these bankers. You often lunch with them. You socialize with them. There are - reporters have looked at your phone records and seen that they're the first calls you make in the morning and the last call you make in the evening and sometimes calls are made directly before important meetings or important decisions are made regarding their future. What do you say to that - is that appropriate?

Sec. GEITHNER: My job, a very important obligation I had coming in was to make sure we were fixing this very broken financial system. We repaired the damage caused, and we had to do in (unintelligible) a bunch of things that no secretary would ever 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.

But I spend as much time as I can talking to businesses across the country to small banks, not just small businesses, to community leaders, not just, again, in parts of the economy that are going relatively well, but those parts of the economy are hurt the most. And that's the necessary thing for me to do. But we had to some things to fix the financial system that were absolutely necessary. Nothing would've been possible without the economy - it would still be shrinking, unemployment 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 freefall.

NORRIS: But I understand what you're saying, but I'm not sure if that addresses the concern about your closeness to particularly three large banking institutions.

Sec. GEITHNER: Michele, I think it's a misperception. Again, I'm the secretary of the Treasury. 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 is no way anybody could do this job without doing that. The important thing is to make sure that we are spending time listening to the broader business community, the broader people in the financial system, not just large banks, but just spend a few minutes with the president in the Roosevelt Room, meeting with small community banks, which we do a lot all the time. But no secretary can do his or her job without spending some time understanding what's happening in our financial markets in the largest parts of our financial system.

NORRIS: As you know, some of the community banks say we would love to have that kind of access to the Treasury secretary... (unintelligible)

Sec. GEITHNER: My first meeting in this job was with people running community banks, can be bank associations. I spend a lot of time with them, substantially more time than I spend with any individual large bank.

NORRIS: Secretary Geithner, thank you very much for your time.

Sec. GEITHNER: Nice to see you.

NORRIS: Happy holidays. That was Treasury Secretary Timothy Geithner talking with me earlier today in his office.

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