Geithner Backs New Finance Rules, Extended Tax Cuts, to U.S. Lawmakers
Sep 22nd 2010 7:01PM
Updated Sep 22nd 2010 7:08PM
International banking regulations agreed upon in Basel, Switzerland, last week will reduce the probability of a future financial meltdown, U.S. Treasury Secretary Timothy Geithner said before the House Financial Services Committee today.
The so-called Basel III rules will, among other things, require banks to more than triple the percentage of equity held against risk-weighted assets, said Geithner. The Treasury secretary also argued that tax breaks for the middle class and small businesses should be extended, though he was noncommittal about extending George W. Bush's tax cuts for the wealthiest U.S. citizens beyond this year. He was also vague on when a chair for the newly created Consumer Financial Protection Bureau would be nominated or named.
"These heightened capital requirements, along with other important reforms, should substantially reduce the likelihood that we will soon repeat the sort of severe financial crisis that we have just lived through," Geithner said in his prepared remarks.
The U.S. is among a group of nations looking to make banking standards more stringent over the next few years in an effort to prevent future financial meltdowns like the one that plunged the economy into a recession in 2007. Along with issues such as potential tax extensions, financial standards are among the points of contention between President Barack Obama and members of Congress on how to best pull the U.S. out of its economic downturn.
"Our system would've been much more stable and much more resistant to handle a recession like this if we had those requirements in place," Geithner added, in response to lawmakers' questions.
Some lawmakers have argued that such regulations may put U.S. banks at a relative disadvantage to overseas financial institutions operating in countries with less stringent capital and liquidity standards.
"We're going to have to monitor very carefully and pursue very aggressively any signs of different standards" abroad, Geithner said.
Geithner also pitched Obama's plans for financial incentives for middle-income citizens as well as small businesses, though he deflected questions about extending Bush-era tax cuts for the wealthiest 2% of the U.S. beyond the end of this year, noting that such cuts would be the equivalent of a $700 billion loan.
Geithner also favored what he called an "early" appointment of a director to the newly created Consumer Financial Protection Bureau. The Administration was criticized by commerce leaders last week after naming Harvard University professor Elizabeth Warren as an advisor to Geithner, rather than as director of the new group -- a move that exempted her from Senate approval.
When asked repeatedly what he meant by "early," Geithner would only say "early."