Treasury Secretary Geithner: 'Capitalism will be different'
The Secretary of the Treasury is promising "traction" -- tangible evidence that the financial system is being fixed -- in the weeks and months ahead.
U.S. Treasury Secretary Timothy Geithner, in an interview Tuesday night with PBS's Charlie Rose, admitted that "expectations got ahead of the policy" regarding the administration's plan to fix the banking system, but promised that the plan he's developing with other, senior economic officials will begin to show tangible results.
Geithner called the administration's plan "a comprehensive plan to address the problem" that will use both capital injections to banks to sell toxic assets and federal loans to buy the assets. Geithner also told Rose he'll begin to release details of the program -- the outline for which, released earlier, was deemed "details light" by both Wall Street and the Congress -- but he cautioned investors against judging the program by whether the Dow rises or falls on a daily basis, and he defended the administration's communication strategy for the program.
"It was always our intention to lay out that broad framework of strategy at the beginning so people could see the full scope of the strategy and then lay out the details," Geithner said to Rose.
Geithner, in his now-characteristic calm, uber-informed, and authoritative manner, told Rose the financial system repair has four indispensable parts: 1) getting the recovery back on track with aggressive fiscal stimulus; 2) fixing the housing crisis; 3) helping get credit flowing again, making the financial system work with the recovery rather than against the recovery; and 4) getting the world together to solve the crisis.
"Doing nothing" not an option
Geithner also echoed the opinion of most economists that "doing nothing" would make the recession, already pervasive and deep, even worse.
The Treasury Secretary also said there's private capital that wants to come into the financial system to buy the assets, it's just that it can't get financing. A critical component of the administration's program will do exactly that, he said.
One key: Nonbank institutions
A key component of the program, Geithner said, involves going around the banking system, working with nonbank institutions -- which typically provide 40 percent of the financing in the financial system -- to provide financing to these institutions of up to $1 trillion to purchase toxic assets and free-up credit in small business lending, student lending, auto finance, and the consumer credit markets.
Further, Geithner added that the markets, consumers, and analysts alike will begin to see tangible results from the program in the weeks ahead.
"These things will get traction. They will start to help unfreeze things, and they will help lay the foundation for recovery," Geithner said.
Former U.S. Treasury Undersecretary Randal Quarles, now of the Carlyle Group in Washington, told Bloomberg News Wednesday that the administration's plan is "reasonably well designed; the question now is in the execution."
A new era for United States
Rose concluded by asking Geithner if capitalism in the United States will be different after the intervention.
"I think capitalism will be different, and the financial system will be dramatically different. It's already dramatically different," Geithner said to Rose. "Again, if you look at the scale of adjustment and restructuring in the financial system, it's already happened."
Economic Analysis: The most important points of Geithner's conversation with Rose, for investors? Traction and financing. While investors must remain patient -- healing credit markets will take many months -- if the administration's tactics show positive results or traction soon, that could represent a psychological turning point in the crisis, the sign that we're getting on top of the problem and beginning to get momentum headed in the positive direction.
Second, concerning financing, the administration believes it is cheaper and better to provide U.S. government financing than to have the government buy the assets outright. While not ruling out the possibility of the creation of new banks to supplement the process, the Obama administration believes it's more feasible to use the existing banking infrastructure -- in conjunction with nonbank financial institutions -- to heal, normalize, and strengthen credit markets. And that's the view from here, as well.
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Reader Comments (Page 1 of 1)
3-11-2009 @ 1:31PM
Judy Lynn Clark Ferguson said...
Geithner does not know what the hell he is talking about he just hopes someone is listening. Well, I am not listening to any of those Greedy Politicians so I can continue to loose my A--! This is nothing but a result of Government Corrpution in collusion with Wall-Street, Special Interest and Friends! If this administration intended to stimulate the economy they would have given the TARP to the PEOPLE so they could have paid their mortgages and credit cards off instead of giving it to Banks who took the money and invested it into Foreign Countries. Now they took our tax money and sent it overseas to try make more money and now the markets overseas are dragging the ground. Wall-Street and these Banks will never become profitable again as long as you have these selfserving Greedy Pigs taking Billions of American Dollars and sending it to foriegn Countries. Protectionism my A--! I do not know who came up with that ideal was it the same Greedy ones who cauised this financial Crisis or was it Phil Gramm? He needs to be locked up right besides Madoff all of the crooket manipulations he has done over the years that has forced America to bankrupt.
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3-11-2009 @ 2:27PM
CK said...
Geithner's analysis is silly and self serving. Money is flowing into the dollar ONLY because the world sees the USA as a strong Economic engine, compared to the socialist economies, which are the only alternative. Obama wants to change that so we become a socialist economy also. If he succeeds, we, and the world, are in for a very sad, and deprived, future.
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3-11-2009 @ 3:35PM
MICHELE said...
I AGREE WITH JUDY I SAID THAT MONTHS AGO THE GOVERMENT SHOULD HAVE GIVEN LONG TERM LOW RATES TO THE PEOPLE SO THAT THEY COULD PAY THEIR BILLS AND THAT WOULD HAVE STABILIZED THE BANKS AND PEOPLE WOULDN'T BE LOSING THEIR HOMES
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3-11-2009 @ 3:51PM
Robert McLean said...
Both Obama and Geithner are too young and inexperienced. They totally mishandled the proper communication of a plan to cure the banking problems in this country and lost all credibility at a time when there is no room for error. Obama talks and talks but he does not actually know what is going on. His proposals show this. His failure to see that he and Geithner make clear statements so the world financial markets, investors and institutions know what the rules are shows ignorance.
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3-11-2009 @ 7:37PM
winslow said...
Geithner may have a workable plan. After 8 years of poorly executed plans, we no longer know what good management is. I've been critical of Geithner in the past. The economy is so chaotic today, everyone is running around like chickens without heads. ...wanting immediate solutions (that's because we were never given viable solutions in the past). I'm beginning to warm-up to a long-term plan with teeth.
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3-11-2009 @ 6:57PM
wingnut said...
Mister Obama did say one thing that caught my attention. When talking about how to reform healthcare, he said that we can't talk about reform until we talk about "costs". Now I'm an armchair politician and watch cspan's dog'n'pony shows, and I see one thing that keeps rearing its ugly head. the COST of "getting things done" (starting and continuing projects of ANY kind). Politicians are often seen wrangling budgets instead of laws and policies, and many projects have become what i like to call "inini" (infeasible and implausible and impractical).
Now, was Mister ObamaRamaLamaDingDong talking about the cost of healthcare to the USER, or the cost of healthcare to the hospitals and clinics?
If the latter, he's maybe locked onto the circularity of capitalism. Capitalism is a one-direction spirographical system (Bills/demands/invoices/timecardings go around, then come around, once handed-on a thousand times).
In spirographical systems, it is theoretically true that ANYTHING "issued", gets handed-on and handed-on until it comes around... including giving/love. I don't know if anyone studies this kind of stuff, but in the old spirograph toy, the theory was true. No matter which way you started rotating the gears... ebb or flow... billing or giving... the spirograph pen ALWAYS returned to its starting place (the issuee). This happens because... the TIP of each spiroflower petal (person)... is a LOOP and not a point.
If one were to do the same scene at a circular dinner table with many seated around it... then one person would get scared for some reason, and reach across the table at some angle, and take some food from another's plate (do a billing/invoicing). Then THAT person would get rationed-scared, and reach across the table at another angle, and bill another for some food. Etc etc. Eventually, someone would take food from the person who FIRST billed someone else.
The same happens for giving, theoretically. Someone reaches across the circular table and puts some extra food on another's plate. That person then sees they have too much, and reaches across the table to put food on another's plate. This spirography circles and circles and circles, until the sharing/love eventually returns to the issuee.
Can Mister Obama or ANYONE in high places... understand spirography/goes-around, comes-around? He has shown hope, via saying he wants to address costs. That COULD mean... he wants to address costs of living/operating! And that could mean... we'd be on our way to the inevitable outcome... the true fix. Abolishing economies and ownership, and making monetary discrimination and servitude (capitalism is infested with it) forever illegal. What a wonderful day that would be. No more 18 year olds forced into the competer's church (get a job or die)... and no more Chicago mob-like extortion (pay up or lose your house/wellbeing). Christianity would rule once again, eh? Potlucks and barnraisings and communes like the USA military supply system and USA public library system (no monetary discrimination or ownership). Wouldn't that be wonderful?
Its just a dream, isn't it? Nod. Sorry for topic wandering... if I did. Wingnut - Anti-capitalism-ist (system fighter, not people fighter).
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