As Economy Jitters Persist, Geithner ‘Confident We’re Going to Continue to Grow’
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JIM LEHRER: The stock market rallied for the first time in more than a week. The Dow Jones industrial average was up more than 170 points, before doubts about the economy took hold again. The Dow finished with a gain of 57 points to close at 9743. The Nasdaq rose two points to close near 2094.
Market fears have been magnified by weakness in job creation and housing, and investors remain nervous about financial reform.
We talked about this earlier this evening with Treasury Secretary Timothy Geithner.
JIM LEHRER: Mr. Secretary, welcome.
TIMOTHY GEITHNER, secretary of the Treasury: Good to be here, Jim.
JIM LEHRER: Has the economic recovery taken a sudden turn for the worse?
TIMOTHY GEITHNER: Jim, the economy is healing, it’s getting stronger and I’m very confident we’re going to continue to grow and continue to make progress – not just repairing the damage caused by this crisis but building a stronger economy that’s going to create better opportunities for all Americans.
JIM LEHRER: But it doesn’t seem that way. All the current things — the stock market, jobless rates — we’ll go through these specifically in a moment, but there’s a feeling that things — there might even be a double-dip recession coming. You don’t feel that?
TIMOTHY GEITHNER: Well, Jim, I think it’s important to recognize that the scars of this crisis cut very, very deep. I mean, just remember what it was like a year and a half ago. People across the country saw their savings fall by more than 40 percent. Thousands of businesses were closing their doors. Millions of Americans lost their jobs. In January alone of 2009, you know, the economy lost three-quarters of a million jobs.
But we’ve now had six months of sustained growth in jobs by the private sector. Exports are doing relatively well, investment is increasing and you can see companies across this country — in high tech and lots of other industries — doing very well because we are a very resilient country, very strong country.
And this president acted with enormous political courage to rescue the economy. He took some very tough steps — not popular steps — to rescue the economy, fix the financial system early and take on the tough reforms. And because he did that, we’re going to emerge from this stronger.
JIM LEHRER: But if it’s going so well, then why do so many people feel it isn’t going so well?
TIMOTHY GEITHNER: Again, because, again, the scars of this crisis were traumatic. People experienced something they hadn’t experienced in their lifetime, which is to see the value of their savings plummet — a terrible blow to basic confidence.
And you’re still seeing lasting effects of that damage on business confidence and how people feel about their basic lives. People feel, understandably, still a little cautious, a little tentative. We’ve seen a little concern about Europe wash across the American economy.
But you know, no recoveries are even and steady. But what you can say today with confidence is we’re in a much stronger position today than we were 18 months ago, a much stronger position to deal with our challenges ahead and we’re going to continue to work to make sure we make progress and restore – repairing what was damaged, restoring a basic sense of confidence to American businesses and American families.
JIM LEHRER: Well, everybody would agree that the biggest concern everybody has is their jobs — is their job and other peoples’ jobs. Isn’t it, what, 7 million jobs have been lost since the crisis hit and only 600,000 have been recovered thus far?
TIMOTHY GEITHNER: No, we’ve got a long way to go, still, absolutely. And again, it just shows, again, how deep the hole was, how bad things were. But we’re making progress; the economy is growing. You need growth before you get job creation. The economy has now been growing for a year. And again, we’ve had six months of sustained increase in job growth. Incomes are rising again, people are working longer and that’s going to continue to get gradually better.
And again, we’re going to keep working at it, trying to make sure that we’re doing everything we can to make sure this economy is growing, people have more opportunity, better confidence they’re going to have a chance in the future.
JIM LEHRER: Speaking of confidence, has the downward moves of the stock market in the last several days and weeks – does that trouble you?
TIMOTHY GEITHNER: Well, again, you had a – we had a long run of improving markets. Home values were more stable, the value of peoples’ savings increasing again. And that’s very good. It’s a sign of greater confidence again. And again, you’ve seen, you know, recoveries are never even, never steady.
You see a little bit of concern coming from Europe about their capacity to manage through these problems. But I think they will manage through their problems in Europe. I think they’re taking the steps they need to take to make sure that they’re growing again.
If you look across the rest of the world — China, India, Brazil, Mexico — emerging markets are very strong now. And America is very good at producing the things those countries need. We have the most-productive workers in the world. Our great companies operate at the frontier of innovation across the things that are so important to growth around the world. And that’s one reason why we came out of this crisis more quickly than other countries. And again, we’re going to continue to make progress, Jim.
JIM LEHRER: But at the micro level, at the human level, some of the congressional oversight people on housing estimate that — or say — there’s going to be a million more foreclosures every year for the next several years.
TIMOTHY GEITHNER: And housing is still very tough. It’s still very tough. But again -
JIM LEHRER: Isn’t that what really matters to people, plus their jobs? Everything else is kind of secondary to them?
TIMOTHY GEITHNER: For people who own a house, in many ways, it’s still their most important financial asset. They’re still going to have some savings in the bank that matter to their financial security but the value of their house is still very important.
And when the president came in, most forecasters thought house prices could fall another 30 percent. But in fact, we’ve seen almost 18 months of basic stability in house prices because of the actions the president took. It’s much more affordable now to borrow to finance a house, to refinance.
And the president has put in place a series of programs to give more Americans a chance to keep their home, if they can afford to do that. And these programs are helping to lower their monthly payments. But again, the housing market’s still very hard — very tough out there — and a lot of challenge still ahead. But that basic measure of progress, which is a little more stability and the value people — is enormously important.
JIM LEHRER: Here again, on the individual level, there are – you’ve mentioned some of the federal programs. One specifically has $50 billion set aside to help people with foreclosure problems. And that was — it started 15 months ago, and yet, only $200 million of that money’s been spent.
TIMOTHY GEITHNER: OK, but no, this is a very important program. Again, what the president did right away was to take a variety of steps to try to make sure we bring interest rates down to make it more affordable for people to keep their house. That helped put a floor under house prices. That’s very important. Because as you said, that’s one of the most important financial assets a family has.
But he also put in place this program that has given more than a million Americans a chance to stay in their house. And those programs lowered monthly payments very substantially — an average of about $500, $600 a month for people who benefited from those programs. And we’re going to continue to work to make sure those programs reach as many people as they can.
We’ve announced a series of programs for states to go directly to the hardest-hit states — the 10 states most hit by falling home prices, high unemployment, to make sure they have more resources to help homeowners that are unemployed or suffer some other financial — unanticipated financial problem. But we’re going to keep working to make sure these programs reach as many people as we can.
JIM LEHRER: Isn’t it correct to say, though, that they really haven’t touched that many people?
TIMOTHY GEITHNER: Well, again, the stability in house prices and the lower interest rates touch millions and millions and millions of Americans. Everybody who has a house benefits from those things. And the president’s programs, again, have given more than a million Americans a chance to stay in their homes and take advantage of lower monthly payments.
Now, these programs are not going to be able to reach all people hurt by this crisis, and they’re not going to benefit investors who are speculating on house prices. They don’t go to the most fortunate Americans that bought very, very expensive homes or a second home. They’re not going to reach people who lied about their income, were unable to prove that they had income — weren’t able to prove they were eligible. But they are reaching, and have made a very big difference, in the lives of more than a million home-workers, again, giving them a chance to stay in their home.
JIM LEHRER: The financial reform legislation: Is there any question in your mind this could eventually pass the Senate and be signed by the president?
TIMOTHY GEITHNER: No, it looks like it’s going to pass. And it should pass, again, because all Americans have a stake in this financial reforms. Remember, think what it was like 18 months ago. You know, people saw worst financial crisis in generations, the value of their savings fall by 40 percent, on average. Millions of people lost their jobs, lost their homes, saw businesses fail. This crisis touched everybody, and it demonstrates why all Americans have a stake in reforms that are going to give better protections for Americans and make sure that the financial system goes back to the business of helping Main Street businesses get access to credit so they can borrow to invest and expand.
JIM LEHRER: It’s a very complicated bill, and we don’t have time to go through the whole thing, but one of the things that caused the financial crisis was this “too big to fail idea,” particularly among the banks. And most of the analysis of the current situation is, these banks are not only as big as they were; some of them are even bigger, now, than they were when the financial crisis hit. So how’s anything going to change?
TIMOTHY GEITHNER: Two most important causes of this crisis, Jim, were that we allowed a bunch of financial activity to operate in the shadows. Firms take on enormous amounts of risk without the financial cushion and capital to back those investment moves they made, and we let millions of Americans be taken advantage of, vulnerable to fraud and abuse. That’s what caused the subprime crisis.
Now, what this bill does, though, is extend to all Americans – consumers and investors – much better protections against fraud and abuse and predation, and will limit risk-taking by these large institutions so they can never again put the economy in a position where the mistakes they make put the economy at risk as a whole.
JIM LEHRER: If this bill becomes law, does that mean we are no longer at risk of a similar financial crisis?
TIMOTHY GEITHNER: We will have a much better chance to prevent future crises and limit their damage — act much more effectively and much earlier and limit the damage and not leave the taxpayer exposed to bearing the burden of these crises. These are very tough reforms, very strong reforms, and they will help restore trust and confidence in the system.
Think back, Jim, to the Great Depression. It took this government four years after the great crash of 1929 to put in place basic protections for banks, and the securities laws, and those reforms laid the foundation for decades of the most-impressive record of investment, innovation, growth any major economy had ever seen.
But we allowed the moss to grow, risks to operate in the shadows. The market outgrew these protections, and the damage caused by that failure was catastrophic. But what these reforms do is prevent that from happening again, because it will extend this set of protections across the economy and make sure, again, banks can’t take risks on the scale that they could damage the economy as a whole.
JIM LEHRER: Finally, Mr. Secretary, putting all this together now, after these many months and where we are now, do you understand why there are still millions of Americans very angry about what’s happened to them as a result of the financial crisis and the economic crisis that has followed, and that so many of these things have yet to be fixed?
TIMOTHY GEITHNER: Absolutely. People are still incredibly angry and frustrated that they, who were responsible, careful, in the decisions they made, were damaged by the actions of people who were irresponsible, by the failures of Washington to provide basic protections against financial crisis. And again, the scars of this crisis cut very, very deep and they’re going to last for a long time.
And that’s why all of us in Washington have such a great responsibility and obligation to make sure we are working every day to make sure we have an economy that’s creating jobs, again, at a more faster pace, we fix what is broken, and again, we restore confidence in the basic strength of America in providing opportunities to those who work hard.
JIM LEHRER: Mr. Secretary, thank you very much.
TIMOTHY GEITHNER: Nice to see you, Jim.