Here’s the transcript of Tim Geithner’s appearance on CNBC, which is coming up at 2:00 PM..
ERIN BURNETT, host: So I guess I’ll just start off with the plan. If you had to say, ‘This is the most important part of this plan,’ obviously it’s complex, it’s got different parts, but what is the most important part?
Secretary of the Treasury TIMOTHY GEITHNER: It’s the–it’s the next step
in the series of efforts we’re taking to make sure that the banking
system is doing what it should do, which is to provide credit for the
economy. We’ve already taken a bunch of actions to help get mortgage
interest rates down, to help millions of Americans refinance their
homes, to take advantage of lower interest rates. We launched a very
powerful small business lending program, for obvious reasons. Last week
we launched this new program to get securities markets going again. We
saw almost $9 billion in new issuance, more than we’ve seen in the last
four months together. That’ll help bring interest rates down, too. So
all these things are designed to help get credit flowing again at lower
cost to businesses and families across the country.
BURNETT: If you thought about it like a pie, I mean, there’s so many
different programs out that–there that you’ve done, and as you said,
some of them are starting to work, what’s the biggest piece of the pie?
I mean, there is this perception, ‘oh, toxic assets, legacy assets. If
we just deal with the elephant in the room, things will be all right,’
and that would make you think that’s the biggest piece of the pie. Is
Sec. GEITHNER: It’s not the biggest. It’s not the biggest piece, but
it’s important piece. Because, you know, right now you have a bunch of
loans people made over the last four years before the recession. They’re
still sitting on the system, and they’re making it harder for people to
lend, have confidence. And we’re trying to provide a mechanism to help
the market take those assets off the balance sheets of banks. That’ll
free up capacity for lending. It’ll make banks–easier for banks to help
go raise equity in the markets, and again, that’ll help get lending
going again. But it’s an important part, but it’s not the critical part
of this overall plan.
BURNETT: Ben Bernanke said last week on “60 Minutes” that one sign of
stability would be if the banks were able to raise private capital. It’s
interesting. The banks have come out recently and said they’re
profitable. They’ve all said that. They’re doing well. But none of them
have raised equity, and none of them have raised debt without government
Sec. GEITHNER: Some have.
BURNETT: A very small amount.
Sec. GEITHNER: Right.
BURNETT: And the question is, are things a lot worse than we think with
the banks, that–or are they, need to take the training wheels off and
stop freeloading off the taxpayer?
Sec. GEITHNER: I think you’re going to see people start to raise equity
again. I think they will.
Sec. GEITHNER: Not sure how soon, but I think that’ll happen. Again, by
helping get these markets for real estate…(unintelligible)…
going again, if you’re helping provide financing to get the securities
markets going again, you’re going to make it more likely that these guys
are able to clean up their balance sheets and raise private equity
again. I–it’ll come.
BURNETT: How quickly is this–I mean, it seems like it’s contingent on
this plan starting to work. Some investors I’ve spoke with have said we
could start to have auctions as soon as right after Easter. Is that too
aggressive of an expectation?
Sec. GEITHNER: We’re moving as quickly as we can, and as soon as we have
the terms designed in a way we think it’ll work for the taxpayer, and
soon as we get the operational infrastructure in place, we’re moving.
But I think the–and this is joint Treasury/Fed/FDIC program.
We’ll–we’re going to move as quickly as we can.
BURNETT: Taxpayers obviously have a lot of questions about this–you’ve
been trying to protect them in some ways, but the government’s obviously
providing low interest loans to investors and going in dollar for
dollar. That is helping the investors, the private investors, with
taxpayer money. If you had to explain to America, what kind of term are
they going to get? What’s your hope?
Sec. GEITHNER: They’re going to get a market orient–they’re going to
get a return that private investors get alongside the market in this
case. You know, this isn’t the best way, in our view, to protect the
taxpayer. The alternative approach is–which you have the government
buying all this stuff, taking on all the risk under a balance sheet,
which would be much more expensive to the taxpayer. The alternative of
letting it just sit there, let these assets just sit on the balance
sheets of banks who are at risk, creating a much longer, deeper
BURNETT: And see, because some of the banks say to me they could do
that. They could sit on the stock.
Sec. GEITHNER: They could.
BURNETT: They are making loans, but the real lending problem is in the
nonbank system, which did account for half of the lending in the
country. And they say, ‘We could sit on it. In fact, we’re not really
sure we’re going to like the pricing here. And maybe we will sit on it.
Sec. GEITHNER: Well, you know, parts of our banking system are growing
and expanding. We have plenty of capital. But there are other parts of
the system that are going to need a bit more insurance, a bit more
assistance to get through this and be able to lend. But, you know, what
guides what we’re doing, again, is what’s what’s–we’re going to try to
do what’s–all that is necessary…
Sec. GEITHNER: …to get the financial system back to the business of
providing credit to businesses and families. Everything we’re doing is
motivated by that basic objective, because that’s critical to getting a
recovery back on track. So we have economic recovery, this very powerful
reinvestment recovery program, but we’re going to need financial
recovery, too, for that to work. We need to do both those things
BURNETT: And are you confident it’s going to happen by the end of the
year? I’ll say I’ve been surprised; more bank CEOs from regional banks
have been expressing some confidence. There’ve been more signs of
stability. The Fed chairman referred to that last week. But then there
are some very major companies in this country who have said to me, ‘We
see red flags everywhere.’ Do you really think that we can be growing in
this economy by the beginning of next year?
Sec. GEITHNER: Well, I agree, you are seeing some encouraging signs, but
this is going to take some time. You know, this took–take–these
problem took a long time to build up, they’re going to take some time to
work through. And that’s why we’re moving so aggressively with the
Congress to put in place as powerful a set of programs we can to get
Americans back to work.
BURNETT: You just said “with the Congress.” Were you shocked at the
legislation out of the House on bonus compensation last week?
Sec. GEITHNER: Look, there is a enormous amount of outrage and
frustration across the country, and it is completely understandable. I
share that frustration and outrage. People have watched–people who were
careful and responsible in their personal decisions are being terribly
damaged by the actions who–of people who were terribly irresponsible.
And they are frustrated and angry. And we have a deep obligation to make
sure that everything we’re doing is designed to get, again, get recovery
back on track, end this recession as quickly as we can, and get the
financial system back to doing what it needs to do. And that’s going to
require we put strong conditions on taxpayers’ money to make sure we’re
not rewarding failure, and that our assistance’s going to help generate
more lending, not reward executives got in this mess. But we also need
to make sure again that we get credit flowing again. That’s our core
obligation. But the American people are right to be frustrated and
Sec. GEITHNER: And we need to move, for their sake, to get this recovery
back on track.
BURNETT: You mentioned–and obviously there are some serious questions
out of this–you mentioned the success of the TALF program last week.
There were some initial auctions to try to get it, in the case of credit
card and car loans, moving. A lot of people on Wall Street said there
was some success, and they didn’t want to minimize that. But they
strongly emphasised the participation was not what it should have been.
And the–and the honest reason for that is, a lot of this private
investor money doesn’t want to deal with the government. Because the
government might come in and say, ‘Well, we’re going to take your bonus
from last year,’ or, ‘We’re going to say you can’t hire anyone born in
the United States of America.’ Is there going to be an assurance, as
part of this toxic asset plan, that the government isn’t going to go
change the rules retroactively?
Sec. GEITHNER: Understand the concern out there. For us to–for this to
work, again, for us to get the economy back on track, we’re going to
need investors to take risk. We’re going to need banks to take risk
again. And we need to make sure that they’re able to take risks so that
the government’s not faced with the decision of taking all the risk
itself. That would be much more expensive to the taxpayer, and it would
be a bad strategy for the country.
BURNETT: There’s no decision, then, on the compensation?
Sec. GEITHNER: But there–but we’re going to work through this. As the
president said, you heard him say, we need to balance again the
important principle that we don’t want to be rewarding failure and
having taxpayers’ money go to benefit the executives who got us in this
mess. But we all need–also need to make sure we’re getting the banking
system working again, credit flowing again. We’re going to work through
Sec. GEITHNER: And we completely understand that we need to make sure
that the conditions we establish are not going to deter private
investors from taking risk alongside the government. Because, again, we
don’t want the government taking all that risk ourselves.
BURNETT: Right. So it is interesting, because the hedge funds are
saying, and a lot of the private equity folks are saying, ‘We’re not
going to get involved till we know, till President Obama stands up and
says, “Private investors who are going to come in along–not the in–not
the–not the people who work at the banks that got TARP money, private
investors who are going to help buy the assets from those TARP banks,”‘
and it sounds like that’s not yet determined.
Sec. GEITHNER: Very important that these programs be designed in a way,
and these conditions be designed in a way so that these broadly
available programs that’re so important for the housing initiative, for
these lending programs, and for this new legacy asset financing program,
are able to work. And again, that requires that investors are willing to
come in and take risk in this context, and we’re going to work with the
Congress to make sure that’s…
BURNETT: Do you believe they will take that risk without having
assurances the government will not change rules on compensation or claw
Sec. GEITHNER: Well, as I said, we need to work with the Congress to try
to make sure that there’s enough clarity and consistency about the rules
of the game going forward so that they’re willing to come in and take
this risk alongside the government again. And I think–I think there’s
broad recognition that we get these banks lending again, investors
taking risk again, because that’ll help us get recovery back on track as
quickly as possible.
BURNETT: Along these lines, someone said last week, who is a very
respected investor, ‘I’m now putting a risk premium–as in, the risk
that my investments could go bad–to invest in the United States like I
would in Venezuela.’ That investor was only partially joking. And part
of that was because there is uncertainty about the rules, there’s
uncertainty about whether the rules are going to change after, you know,
you said, ‘I’m going to do it this way,’ and then, ‘Oh, guess what, I’m
going to go change it.’ You’re one of the guys trying to set the rules.
You’re sort of that broker between the administration and between the
people who are going to invest money. How does that make you feel when
you hear someone says invest in the United States like investing in
Sec. GEITHNER: Our obligation is to make the American people confident
that we’re going to use taxpayer resources in ways that, again, that are
get–going to get credit flowing again, get recovery back on track, and
are not going to be abused to reward failure. That’s a–that’s a
difficult balance to strike, but we’re going to work through this and,
working with the Congress, we’re going to find the right balance.
BURNETT: In terms of the G20 coming up, obviously part of that you were
going to be talking about new regulation reform, and part of that did
include compensation. Do you have any sense as to whether you’re going
in the direction of formal salary caps on all US publicly traded
companies, or perhaps caps that would say an executive at a publicly
traded company can only make X times the average worker?
Sec. GEITHNER: The reforms we’re going to propose to the Congress and
internationally are going to be designed again to make the system more
stable in the future, to end this cycle of boom/bust, major financial
crises every five years or so. To end that we need to make sure the
system has much stronger set of standards, protections, constraints on
risk taking, more effectively enforced, and that we have a better
capacity for dealing with these kind of failures in the future, better
resolution authority, better capacity to deal with future AIGs, future
Lehmans. As part of that, part of this effort to constrain risk taking
in the future, we’re going to have to reform compensation practices.
Those compensation practices just got way out of whack with
Sec. GEITHNER: People were getting compensated without any due regard
for risk. It’s outrageous what happened in our country over the last
five years or so. And we’re going to have to bring, as the president
proposed in early February, some very comprehensive reforms to that. But
you need to look at this in the context of a broader set of regulatory
reforms that’re designed to make the system more stable, make sure that
consumers and investors have more protection. We have a more streamlined
BURNETT: Does the administration believe that you need to be specific
about? It’s one thing to be paid…
Sec. GEITHNER: To be proscriptive or specific?
BURNETT: Specific. That it’s one thing to say compensation got out of
whack, and we all know, the average executive in this country made 400
times the average worker last year, and that’s obviously a–if you look
at Japan, you look at Canada, you look at Britain, in that sense it was
out of control. But it’s one thing to say that, and it’s another to sort
of hold it over everyone that you’re going to change it, but not say
exactly how. When are we going to know how?
Sec. GEITHNER: I think the government–I think government needs to let
out broad standards that meet this basic test to try to make sure that
the people running these institutions responsible for controlling risk
are compensated for being careful and prudent, not compensating for
taking–for taking risks they don’t understand. And those are the kind
of standards we’re going to–we’re going to lay out.
BURNETT: And so it’ll broad, it will not be specific?
Sec. GEITHNER: Well, we’re going to find the right balance again, but I
think the right approach is to have broad standards more evenly, more
carefully enforced. Because again, you know, risk management
requirements, checks and balances, capital–they all basically failed to
contain risk. And to make those more effective in the future, you want
not just to get those more effectively designed, but you need to make
sure that compensation practice are working with the kind of approaches
we do to make the system more stable in the future, not against those…
BURNETT: There’s been so much coverage, you know, people on the Comedy
Central talking about people with pitchforks, and in some sense it’s
been humorous, but in a lot of sense it isn’t. And it seems that we’re
sort of at the precipice of there being a–people with money and people
without money, as opposed to just people at–who are getting rewarded at
TARP-recipient banks. Does the administration believe that a key part of
being American is for people to be entrepreneurs and be able to make as
much money as they can on their own, or not?
Sec. GEITHNER: Absolutely. But they want it–people be rewarded for
success, not for failure. And what’s hard for every American to
understand is why people who took their institutions to the brink of
failure and are now dependent on the government to get out of that mess,
are still enjoying what seem to American simply outrageous kind of
compensation…(unintelligible). And that’s a completely understandable
reaction. Again, the tragic thing of financial crises is that the damage
is indiscriminate, and it hurts the people who were careful and prudent,
through no fault of their own, and they are understandably frustrated
and angry. And that’s why it’s so important that the government act now.
Sec. GEITHNER: To try to make sure that all Americans have better
opportunity in the future, and that we restore a basic sense of
responsibility and values to this basic core part of the American dream.
BURNETT: Last week you’d said that you’d looked into those AIG bonuses,
and legally they had to pay them. Larry Summers said this country does
not abrogate contracts. But then the president came out and said,
‘Secretary Geithner, go back and find a way to get that money back.’ Are
you going to get it back?
Sec. GEITHNER: The president asked us to explore–and we’re working very
carefully with Justice to examine all legal means to see whether we can
recoup those payments. I believe said he’s working with–working to get
that money back. And we’re going to make sure that the taxpayer is
compensated for any funds that aren’t returned.
BURNETT: So you may add it to the tab, 170 billion plus 165 million. OK.
In terms of your position, obviously it’s been tough. You’ve been
described as embattled. Richard Shelby, on a weekend news program, said
you’re on shaky ground. That does not jive with what a lot of
the–certainly Wall Street contingent says about you. The president on
“60 Minutes” said if you offered his resignation, he’d say, ‘Sorry,
buddy, you’ve still got the job.’ How brutish and nasty has this job
Sec. GEITHNER: I feel a great privilege serving the president’s
capacity. It comes with this great sense of responsibility and
obligation that we do everything possible to fix this system, to fix the
mess we inherited, get the economy back on track. This comes with the
job. We have to make hard choices. We’re not going to satisfy everybody.
But we’re doing our best, again, to move as aggressive as we can to try
to fix this mess, get recovery back on track here.
BURNETT: Are you going to be able to hire people? I mean, that has been
a huge concern.
Sec. GEITHNER: Absolutely. Absolutely. And we have a terrifically
capable group of people here working all hours of the day, and we have
done extraordinary things in a very brief of time–brief period of time.
Again, if you look at what’s happened on the housing front, on mortgage
interest rates, on refinancing, on this program to help small business
lending get going again, home securitization markets, providing banks a
form of capital insurance, they can get through a deeper recession.
These are very powerful programs put together in a very short period of
time, and you can see them start to have traction in opening up these
federal markets and getting interest rates down.
BURNETT: Do you need to hire some people who understand the capital
market, people on Wall Street that are the very people that right now
are being pilloried, whether rightly or wrongly, there is a perception;
everyone on Wall Street says it to me: There’s not enough people to
answer the phone at Treasury.
Sec. GEITHNER: Again, we have a terrifically strong group of people here
who are working very hard, people with a lot of experience in the
markets, a lot of experience in policy and regulation, and we’re getting
more people every day. And we’re going to have a strong, powerful,
experienced team that understand both the markets and the politics of
Sec. GEITHNER: And the policy. Because again, what we need to do is make
sure the American people are confident that we’re providing–we’re doing
the best programs that protect the taxpayers’ interests, don’t reward
past failure, make our system stronger.
BURNETT: Final question, your house, it’s up for sale. We know that.
That’s part of the public record. We’re in a housing crisis. You haven’t
been able to sell it, so you’ve got to do this commute. Is that–is that
an indicator we can all look at, when Tim Geithner can sell his house,
things are going to be OK?
Sec. GEITHNER: We’re planning to move my family down in the fall. Can’t
wait to see them, can’t wait to get them here. Don’t like commuting very
much. And I look forward to having them live in the same city with me as
quickly as possible. But it’s not going to happen till the summer
because of the school year.
BURNETT: Because of the school year. OK. Secretary Geithner, thanks very
Sec. GEITHNER: Nice to see you. Thank you.