Geithner Defends Plan for Regulatory Overhaul

JIM LEHRER:

Now, our interview with Treasury Secretary Timothy Geithner. I talked with him earlier this evening.

Mr. Secretary, welcome.

TIMOTHY GEITHNER, Treasury Secretary:

Thank you.

JIM LEHRER:

How do you feel about the reactions you've received to the big announcement of the new financial rescue plan?

TIMOTHY GEITHNER:

Very good so far. It's early, though, and this is a very a very complicated thing. It's going to be important to get right, and there's going to be people on all sides of this, and they're going to take a long time looking at it carefully. But I think it's pretty good so far.

JIM LEHRER:

The commercial banking industry has come out very strongly against it on the grounds that you went after the wrong targets. They were not the problem; it were all these other financial institutions that caused the crisis, and yet you've gone hard against them. How do you respond to that?

TIMOTHY GEITHNER:

I don't think that's fair. I think anybody looking at what our economy has been through, the financial system has been through would have to conclude that there were systematic failures in the risk management at not just non-banks, but at banks, and systemic failures…

JIM LEHRER:

At bank-banks, you mean?

TIMOTHY GEITHNER:

Banks, as well. And failures in consumer protection, too. I mean, just look at the damage caused by what happened in the mortgage market, in the consumer credit market.

And look at damage caused by the fact that we had institutions just take on huge amounts of risk. Took themselves to the edge of the abyss, and put a huge amount of stress on the economy, causing enormous damage to lives and fortunes of businesses, families across the country. You know, it really did take us to the edge of a very deep, traumatic recession.

JIM LEHRER:

Joe Nocera, financial writer for the New York Times, had a piece today, and he said that your plan is, quote, the Obama-Geithner plan, let's call it, is, quote, "little more than an attempt to stick some new regulatory fingers into a very leaky dam rather than rebuild the dam itself."

TIMOTHY GEITHNER:

Well, as you say, we're going to get it from both sides. Some people will think we're being unfair, doing way too much, overdoing it. And some people are going to say we're not going enough.

But let me just say the most important things we're doing. We're going to put in place stronger protections for consumers; that's a basic obligation of governments, and our system failed to do that.

We're going to make sure the system has much stronger shock absorbers, cushions to absorb the stress of future recessions.

And we're going to make sure the government has better tools for managing future crises. Those three things are very important. They're the most important things for us to do, and we've put a set of very strong proposals to achieve that outcome.