Tim Geithner spoke on CNBC Wednesday morning at the Alpha investor conference.
Highlights from his interview with Jim Cramer were that he said there will be not be another Lehman and that Europe has full capacity to meet its challenges and now it just has to convince the world that it’s committed to do so.
He also said that taxes have to go up for the rich in order to be “fair,” but that he’s open to other plans for growth and cutting the deficit, and that the disfunctional political system in the U.S. is damaging confidence.
Here’s what he said. Important points are bolded. We’re uploading the video of the entire speech now and will post in a moment.
GEITHNER ON CNBC:
8:35 — The economy is still healing. Then we had a bunch of adverse shocks – the drama in Europe, the terribly damaging political disfunction. It leaves people wondering whether the political system can do right thing. That’s very damaging to confidence.
8:37 — Europe has a terrible growth problem. Angela Merkel said they are absolutely committed to holding this together and they have the force and capacity to do so. They recognise how severe the constraints are right now and they realise that they have to convince the world that they have the politcal will to do this.
8:38 — Cramer: Do they have a plan for the firms with exposure to the crisis? Geithner: Think about Europe. Europe has a much more indulgence attitude to supporting their institutions. There is not a chance that there will be another Lehman. Angela Merkel has to do what it takes to keep her promise that there is zero chance of a Lehman.
8:40 — Elected leaders of the USA were talking about default and when you ask people to contemplate the unthinkable like that, it makes people cautious. And when we’re still healing from the crisis, it’s a tough position to be in.
8:41 — We have a big interest as a country in getting Europe through this.
Cramer: Could banks pass US stress tests? Geithner: ask the broader community to make their own judgment.
8:42 — This is Europe’s challenge and they have the capacity to meet that challenge. The people that are concerned that the challenges are beyond their grasp are completely wrong.
8:43 — People will have different views about what’s good for growth. I haven’t heard them. If people have a better idea for growth, a better idea for managing this over the next 10 years, that’s consistent with what’s important to our country, I’m opening to hearing that.
8:45 — We have proposed as one way to pay for what the economy, we have proposed raising the taxes of the richest people. Why is that good policy? Our judgment is , that mix of modest changes for a small fraction of Americans has the least risk to growth, least damage to the economy, people might disagree, but that’s our judgment.
8:47 — Capital gains. No one likes to see their taxes go up. We have to make judgments about how we live within our means as a country. We think it makes sense to make modest changes in the current tax benefits of the richest Americans.
What’s the alternative?
Raising taxes of other Americans is a tough challenge in our environment. We could cut healthcare, but there are limits to what we could do that is fair.
8:49 — (Geithner is looking grey)
8:50 — Cramer: How are you going to make people re-finance? Geithner: That’s why rates are low.
8:51 — Cramer: Is there going to be an investigation to find out if there’s hedge fund speculation in oil that’s driving it higher? Geithner: I think oil is driven by fundamentals. Prices have come down to a point where they’re not a constrain on growth.
8:52 — Cramer: Should we outlaw CDS on things we don’t own? Geithner: No you dont want to get in the way of people hedging their risk. That’s bad for the economy. Bad for growth.
8:53 — Cramer: Will you change the repatriation laws re: tax reform? Geithner: We’re not going to do that outside of simple tax reform.
8:54 — How about trade deals that help our exports? Look, if we don’t do trade agreements with countries like Korea, we lose market share, and we believe Korea, Columbia and Panama are good agreements that give us better position to negotiate with the rest of the world. Countries around the world will have an incentive to negotiate with us. Now they dont’ ,We’re trying to change that.
8:57 — Cramer: 9/11. Paulson told me at the memorial, the reason things don’t change is that when you speak your mind, you get fired. People are afraid of getting fired. Are you scared of getting fired? Geithner: I’m hoping… (Everyone laughs) I have never bene in the position where i had to say something that I didn’t believe and been given the chance to fight for what I believe.
8:59 — We need to do whatever it takes to solve economic problems.
9:01 — Cramer: There are people in DC committed to stopping your plan. Geithner: if people have a better plan for growth, we’re open to it. The test of governing should be what’s your plan. And most of the alternatives you hear today are about political gaming, magical thinking about … well i won’t say it.
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