March 24, 2009

Treasury Secretary Timothy Geithner spoke before attendees at The Wall Street Journal's Future of Finance Initiative and said the United States has an "obligation" to makes things right again.

"The world is watching us," he told the Journal's deputy managing editor, executive editor, online, Alan Murray.

Clip courtesy of The Wall Street Journal

Geithner acknowledged that some of the Administration's plans to help the financial system recover may not be very popular but that certain measures would be necessary to help the economy bounce back. "People across the country are angry that the United States got itself in a position where enormous damage has been done as result of a long period of excess risk taking without meaningful adult supervision. We'll find the right balance. We're good at this as a country in finding the right balance over time."

When asked about the government's toxic asset purchasing program and whether the public/private partnerships would actually be willing to purchase these assets, Geithner was cautiously optimistic. He played down the stock market's 22 percent rally from yesterday after the plan was unveiled. "One day does not make a plan," he commented.

"We have a much more complicated financial system than just a system that relies on banks," he said. Although "banks play a critical role" in the financial system, they are only part of the picture. To help banks start lending again, Geithner said they will need a certain amount of capital to do so and that the government is willing to provide this assurance. In doing so, the treasury secretary claims interest rates will come down and a worse depression will have been averted. "Banks can't compensate for the broader dysfunction, loss of capacity to run a capital market where we have secondary markets for a broader array of financial assets. To address that, we believe we have to provide very substantial forms of financing to get those markets going again. This is the next piece in a series of efforts to try to bring that about."

ABOUT THE AUTHOR