Geithner tells Lehrer recovery plans 'absolutely going to work'

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Treasury Secretary Timothy Geithner told NPR NewsHour host Jim Lehrer that the administration's plans "absolutely are going to work" and that "we're going to keep at it" until they do. He went on to tell Lehrer, "I am deeply offended by the quality of judgments we've seen in the leadership of our nation's financial institutions. They caused a very damaging loss of confidence. They created a deep hole of public distrust and anger, which is enormously damaging."

What we do now "we do not do for the banks. It's all for the benefits of people who depend on the banks," he said. Geithner believes the U.S. government must act aggressively to get credit markets unfrozen so that small businesses can borrow the money they need to bid on the projects that will be part of the stimulus bill passed by Congress and help get people back to work. He also said this credit will enable people to get mortgages or buy cars.

Geithner thinks the government must act aggressively now. He thinks in past crises governments have acted too slowly and passively after a major financial shock. They moved too tentatively and gradually and then escalated their assistance when it was too late. "This makes the crisis deeper." Geithner said.

The Obama administration intends to move quickly and aggressively on several major fronts. Last week, the plans for housing recovery were laid out. This week, more details are available about how the administration will "stress test" the banks and get them back into a healthy position so they can lend money once more. Next, the administration will be looking at programs for energy independence and healthcare. Geithner believes we must move aggressively on all fronts to lift us out of this severe recession.

Geithner said, "There is a cloud of uncertainty on the banking system making it hard for banks to raise capital." By doing the stress tests, he will be able to judge the financial health of our major banks and see exactly what type of help will be needed to ensure they can survive even a more severe recession. No banks will fail this test, but based on what is learned, the government will know how much of a capital infusion will be needed to strengthen their position.

The long range plans are to take additional equity stakes, if necessary, but put conditions on those stakes that make the government's help less attractive, so banks will seek private equity as soon as they can and pay off the government to get it off their backs. He repeatedly told the NewsHour audience that this is not a quick fix and we will need to give the government time for this to work.

He said an alternative strategy would be to do nothing, to hope things get better and let the uncertainty about the banking system's health persist. But "that leaves us with a deeper, longer recession."

Lita Epstein has written more than 25 books including the "Complete Idiot's Guide to Value Investing."
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