Geithner Sees Europe Managing Crisis Without Fallout for U.S. Economy
Treasury Secretary Timothy F. Geithner expressed confidence that Europe will resolve the debt crisis buffeting the region and said the U.S. economy is strong enough to withstand any fallout.
“Europe has the capacity to manage through this,” Geithner said in an interview on Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend. “And I think they will.”
Geithner, 48, said he doesn’t think the European turmoil will hurt U.S. growth because “our economy is getting stronger. We’re seeing a lot of strength, improvement and confidence.”
U.S. stocks fell and the euro slumped on concern that Europe wouldn’t be able to contain the crisis. The Standard & Poor’s 500 Index declined 1.9 percent yesterday, while the euro fell below $1.24 for the first time since November 2008.
The Treasury secretary said the almost $1 trillion package that Europe put together with the International Monetary Fund was “an enormously important step” that will help countries in the region cut budget deficits.
Geithner also said a Republican proposal to bar U.S. support for IMF loans to European nations is “absolutely not” reasonable. “We have a big stake in helping Europe manage through these things,” he said. “We’re going to do it in a way that’s sensible for the American economy, the American taxpayer.” The U.S. holds a 17 percent stake in the IMF, an agency created in 1945 to help maintain the stability of the global monetary system.
Geithner praised Senate legislation to overhaul financial regulation and said it would help prevent a repeat of the 2008 U.S. meltdown.
“This is a very strong, the strongest set of reforms we’ve seen the U.S. consider since the Great Depression,” he said. “It’s time to get this done. We want to bring it to earth now so that we can get on to other challenges.”
Geithner said he’s confident top Senate negotiators will modify language in the legislation that would separate commercial banks from their swaps trading desks.
Democratic Senators Blanche Lincoln of Arkansas and Christopher Dodd of Connecticut are working through “the concerns a lot of people have about that specific provision,” he said. “I’m very confident they’ll work out an appropriate solution that preserves the key thing, which is we bring these markets out of the dark, make them safer, more stable,” he said.
Geithner responded to Republican criticism that the legislation doesn’t deal with mortgage-financing companies Fannie Mae and Freddie Mac, which were seized by the government in September 2008 because of their losses. He said the Treasury will “move very quickly” after the financial bill passes to build consensus on reforms of the two companies and the housing- finance market.
The Senate this week rejected an amendment offered by Senator John McCain, an Arizona Republican, to end government support for the two mortgage-finance companies after two years.
Geithner said the U.S. economy is recovering from the financial crisis “more quickly and stronger than many people expected. We can take a lot of comfort and encouragement from the signs of strength that we’re seeing here in the United States.”
Payrolls in the U.S. surged in April by the most in four years, led by gains in private employment that signal the economy is less dependent on government support. The jobless rate rose to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce.
Private employers added 231,000 workers across the economy, from manufacturing to construction to services. General Electric Co. and Berkshire Hathaway Inc. are among companies adding staff in response to growing sales, indicating gains in consumer spending may spur more hiring.
Responding to skepticism in financial markets about Europe’s efforts to tackle its debt, Geithner said, “it’s very natural that people want to see what Europe does. By acting, they will have the chance to earn people’s confidence over time.”
Asked if he agreed with former Federal Reserve Chairman and Obama economic adviser Paul Volcker that there is a risk of “disintegration” of the euro, Geithner said Europe is “committed to fix this problem.”
“I don’t talk about markets and, of course, I choose my words on these things very carefully,” he said when asked if he concurred with Volcker.
Geithner, who is scheduled to meet with Chinese Vice Premier Wang Qishan in Beijing on May 24-25, said he is “confident” China will allow the value of the yuan to rise against the dollar.
“It is in China’s interest that they move to let their exchange rate start to gradually reflect market forces,” Geithner said.
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