Posted on 09/10/2009 11:11:47 PM PDT by Jet Jaguar
Treasury Secretary Timothy Geithner offered a spirited defense of the government's efforts to forestall another Great Depression but cautioned that the recovery would be slow and painful.
"We understood how bad this was—how damaging this was—and we did things that people were incredibly critical of because we knew that this was getting away from us," Geithner told a special CNBC town hall meeting Thursday.
In the wide-ranging session, which took place nearly a year to the day after the failure of Lehman Brothers and the implosion of the nation's financial system, Geithner said the country needs not only to fix what is broken but also take preventive measures against a similar collapse happening again.
"We have to have much stronger rules of the game in place with much stronger constraints on how much risk can take place," he said. "People are so angry. They have had this searing experience that caused so much damage and I think generally people understand that we're going to have to change things. We can't let things go back to the way they were."
Asked whether the Federal Reserve and Treasury acted too slowly when the financial system began collapsing and if it intervened too much once it got involved, Geithner rejected both assertions.
"It feels unfair and unjust, but look at what happens if you take too much risk," he said. "If you indulge the sentiment that you can stall the crisis by teaching people a lesson, you're going to make the crisis dramatically worse and you're going to make it much more expensive to solve."
By the same token, he said the government is anxious to shed itself of stakes in various financial companies—Citigroup [C 4.75 0.09 (+1.93%) ] and American International Group [AIG 37.85 -1.04 (-2.67%) ] among others—but won't do so before the timing is right.
"We're going to be careful not to withdraw too soon," Geithner said. "The classic mistake that countries make in crises is they put the brakes on too early, they reignite the recession ultimately at much greater fiscal costs and much greater damage to the economy. That's the balance we've got to get right."
The bailouts for what he called systemically important companies have worked out well so far, at least in terms of return on investment. Of the $200 billion the government has pumped in from a variety of liquidity programs, it has seen a return of $80 billion so far.
"That money goes to reduce how much we have to borrow and it means that we have more resources available to do the necessary things our country needs," he said. "We're getting a pretty good return on those investments so far."
The town hall setting gave Geithner a chance to speak freely just a few hours after he faced a sometimes-hostile round of questioning from the Congressional Oversight Panel in charge of monitoring the $700 billion Troubled Asset Relief Program.
See Video: Final Words from the Geithner See Video: America's Borrowing Binge As for the economy, Geithner projected continued high levels of unemployment and tepid growth.
He chose to avoid making definitive statements about whether a tax increase was in the cards to help trim down the deficit. But he reiterated Obama's pledge during a speech to the nation Wednesday night that there would not be a tax hike to pay for health care reform.
"Right now, if you’re worried as most Americans should be about how we’re going to afford these things in the future, how we’re going to get back to a point we’re living in our means, the most important thing now, we can do, is to get this economy back to where we’re growing; where firms are investing again; people are creating jobs again," he said.
"And when we do that, the world needs to understand, Americans need to understand that we’re going to bring those deficits down. And that means we’re going to have to bring our commitments and our resources closer into balance."
Also in keeping with Obama's speech, Geithner used the opportunity to take a few jabs at the Bush administration for overspending.
Click here for the latest economic news "We can't ever again do what we did over the last many years, which is to go out and commit to huge expensive tax cuts without paying for them, or to go finance two wars without paying for them, to go finance a huge expansion of Medicare without paying for it," he said.
Setting things right, he said, won't be easy.
"We're going to make progress," he said. "It's not going to be even and quick. I think things are going to feel just hard, unacceptably hard, for a long period of time. But because want to fix this right, it's going to take a while."
For a guy who couldn’t figure out Turbo-Tax, he surely pats himself on the back for being so smart. Who believes a word from this bunch of Leftists?
Little Timmy doesn't want to pull out of our backsides anytime soon, that's for sure.
When you dont pay taxes, big Government is not a big problem. Its free! Just ask Timmy!
“”We have to have much stronger rules of the game in place with much stronger constraints on how much risk can take place,”...”
Much stronger rules? If Congress hadn’t passed the law forcing banks and mortgage lenders to give out sub prime loans, we would not have had the housing bubble, and none of the problems we have today would exist. That’s where it all started. Bush loaned money to the banks to LOAN OUT TO BUSINESSES and keep the economy going. If Obama hadn’t been elected and taken over the banks (sometimes by force to banks which didn’t need the loans), and the auto industry, etc. with bogus loans, we’d have survived the collapse of the economy.
We do have to change things...first we get a new Congress and then we get Obama and Biden out of office. How’s that for change Timmy?
http://market-ticker.org/archives/1422-The-Consumer-Credit-Game-Is-OVER.html
Karl does make some good points. As far as the credit crisis right now, there are two reasons credit is falling. One, those with good credit scores don’t want to borrow. And two, those who need to borrow aren’t creditworthy. The banks have been rocked by ‘jingle keys’ and many who just simply don’t feel they have to meet their obligations. The banks are engaging in damaging business policies by trying to recoup their losses on those who do pay their bills. Another vicious cycle in action.
When you dont pay taxes, big Government is not a big problem. Its free! Just ask Timmy!
Or ACORN!
How about someone who complains about the ‘rich’ paying their ‘fair share’ asking how much in Estate Taxes Ted Kennedy avoided? (Avoidance is not illegal, unlike what Timmy did)
Is it just me, or does anyone else hear the socialism
dripping from his carefully crafted responses?
He talks about “making less this year, but doing what is
good for the country”. Sounds like socialist/altruist
dogma to me. And he dances around answers to tax increases.
I am a small businessman with “skin in the game”, unlike
Timboy and B.O. I hear nothing from him that makes me want to take the risks of capitalism, when I know they will
take away all the profits, i.e. incentives, at the end.
Why take risks if they will take away rewards?
Socialists refuse to get it.
deeptrout.
It is time to change our entire government.
I told him if they did this for all their customers, their credit scores would be damaged and nobody would be able to borrow any more money for things like mortgages and business loans, and this would be very bad for the banks and the economy at large. I was stunned when he agreed with me! He also agreed with me on the “vicious cycle” idea. But he wouldn't budge.
This whole thing with the banks doesn't make any sense to me at all. The government took their toxic assets off their books, right? Why are they clamming up now and hunkering down? The only conclusion I can reach is they're still in some kind of trouble, and we're not being told about it.
If you listen to Bernanke, Geithner, and the rest of that crew, everything is just fine and dandy and we're on the road to happiness and prosperity once again. They're going to have to work some magic to get people to buy during the holiday season coming up. With 12% unemployment here in California and no credit available, I can't imagine we're going to see a big turnout at the stores.
That’s funny?! Bank of America just raised my credit limits. I have accounts but the balance on each is ZERO!
When I heard Charlie Rangel propose the Mother of All Tax Increases when the dems took power in 2007, I knew bad stuff was going to happen. So at the time, I worked hard to become debt free (personal) and limit my exposure in my small business as much as possible. (I only have the accounts with BOA for emergencies.)
Debt is Slavery!
The ‘progressives’ want you to be helpless and dependent on the government. A wise man prepares for the worse but if it does not come, he is better for it!
Why take risks if they will take away rewards?
Socialists refuse to get it.
deeptrout.
Join the crowd, deeptrout! Quite a few small businesses around me are going all cash. (Unfortunatly, I’m unable to do that. But ‘bartering’, is just around the corner.) It is the ‘Producers’ duty to thwart the Barbarians!
Is that Medea Benjamin back there?
You’re making some huge assumptions there. And there are no actual facts to support them.
Deo volente wrote:
This whole thing with the banks doesn't make any sense to me at all. The government took their toxic assets off their books, right? Why are they clamming up now and hunkering down? The only conclusion I can reach is they're still in some kind of trouble, and we're not being told about it.
Here's reality. The Emergency Economic Stabilization Act of 2008 was passed to allocate some $700,000,000,000 to allow the Treasury to “purchase troubled assets from financial institutions.”
However, Helicopter Hank Paulson could never figure out how to purchase the actual troubled assets. So, instead, he just invested the money in preferred stock in the various banks. He was hoping that the investment of capital would offset the losses from the troubled assets, enabling the banks to write them off entirely and clean up their books. But there was no requirement to write anything off, and the banks didn’t actually do that.
TurboTax Timmy has also tried to come up with a plan to actually purchas the Troubled Assets, as the law specified. There have been many proposals, at one point there was going to be an auction, where you bid with 10% your own money and 90% of your bid will be underwritten by the government. But as far as I can tell, not a single dollar of the TARP has actually purchased an actual bad mortgage or “mortgage backed security.”
Oh, yes, and some of the TARP money was diverted by President Bush to buy stock in GM and Chrysler. Then, in February or March, Geithner and Obama also dvierted additional billions of dollars from the TARP funds and “loaned’ that money to Chrysler and Government Motors.
I think TARP funds have been used for other things as well. About the only thing that TARP fund money hasn't been used for is to actually purchase “Troubled Assets.”
Great cartoon! :)
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