Two years into the financial crisis, the economy has made "a lot of healthy adjustment," but there is an "enormously difficult period still ahead," Treasury Secretary Timothy F. Geithner told a New York audience on June 15. "It's early still," Geithner warned. "Repair and recovery will take time."
The Brooklyn native returned to his home state for a question-and-answer session sponsored by Time Warner (TWX) just two days before the Obama Administration is to unveil its proposals for new financial regulations. He reaffirmed the Administration's stance that a strong new regulatory framework is needed to correct a system that is "too fundamentally unstable" and "too fragile" to ward off the economic downturn.
Geithner discussed his commitment to reform that would better protect consumers and their investments, impose stronger constraints on risk-taking, and place a premium on increased accountability and transparency. One of the problems with the current regulatory framework is a tendency to shirk responsibility and blame others for inaction, he said, as he held up his arms and pointed to each side.
"we don't want complacency"
The U.S. economy is now in the "early stages of repair," Geithner said. He praised the resiliency and flexibility that has made the U.S. financial system "the great strength of the American economy." He also spoke repeatedly of the importance of abundant capital as the country emerges from recession, calling the recent ability of U.S. banks to raise capital "easier than expected" and "encouraging."
The Administration's continued commitment to move early and quickly with reform is necessary "while memory is acute in people's minds," Geithner said. "We don't want complacency to set back in."
Referencing President Obama's ongoing attempts to work with Congress to overhaul the nation's health-care system, Geithner maintained that "the path to fixing the economy does go through health care." He stressed that it be "deficit-neutral over the long run."
Geithner also attempted to assuage fears that the federal government will take too heavy a hand in crafting future regulation. "We want there to be risk-taking in our economy," he said. Incentives for innovation should be preserved, he said, but in a system with better protections.