The following is the transcript of U.S. Treasury Secretary Timothy F. Geithner’s interview today with Peter Cook, Bloomberg TV’s Chief Washington Correspondent, in Marseille, France:
PETER COOK, BLOOMBERG NEWS: Mr. Treasury Secretary, thank you for the time. I know it’s been a long night for you. You were at the speech last night, here in France today. Thank you again.
TIM GEITHNER, US SECRETARY OF THE TREASURY: Nice to see you.
COOK: Let’s start on the domestic front. In the President’s speech last night this jobs plan, $447 billion, bigger than some people had anticipated. Is it still big enough to have a material impact on the US economy?
GEITHNER: Oh, absolutely. If you look at what private forecasters have said in terms of the initial assessment it would make a very substantial contribution to growth at a time when we need it and help get hundreds of thousands and more Americans back to work more quickly. Of course the impact it has depends on what Congress actually does. And so we’d like them to do as much as they can as quickly as they can.
COOK: You’ve heard the refrain from some Republicans already this is Groundhog Day. This is stimulus redux and it didn’t work out that well the last time. That’s their view. What’s your argument for them this time around that this is going to be any different?
GEITHNER: Well, first of all, I thought they were actually pretty encouraging last night in their initial response. They recognize, and this went into the design of the package, that large parts of this package have had broad support from Republicans in the past. And there’s no reason with the economy growing more slowly not to take advantage of this moment and that broad support for bipartisan support for these things in the past too and move now on these things.
Now the initial actions we took to address the crisis were incredibly successful in restarting growth and starting to heal the damage caused by the crisis, but it was a terribly damaging crisis. And it was always going to take a lot of time to grow out of it. We’re still healing. We made a lot of progress. We got a lot work to go and we got a lot of things happen in the economy, the growth the first part of this year. We had oil prices go up very high.
We had a disaster in Japan. A terrible crisis in Europe hurt us a lot. You had the damage that Congress caused by the debt limit debate. Those are big blows for an economy still healing from the crisis. And because of those blows we think the prudent, responsible thing right now is to do some more for growth in the short term.
COOK: Can you assure Americans, can you assure members of Congress who have to vote on this plan that if they pass it that we’ll avoid a double dip?
GEITHNER: I think that we’ve got a good chance of continuing a moderate pace of growth coming out of this crisis. And is they were to pass this plan we would dramatically risk the growth - reduce the risks of a long period of much weaker growth.
COOK: We had the original Recovery Act. The Administration said it would keep unemployment from exceeding eight percent.
GEITHNER: Well, let me just correct you here with that. That’s not what we said and it’s a deep political myth that that was our commitment, our promise in the Recovery Act. What we did was marshal an incredibly creative array of financial force alongside the Fed in confronting the worst financial crisis in generations. Now that crisis was terribly powerful, more powerful than what caused the Great Depression.
And yet within three months of the President taking office because of the force of those measures the economy after being shrinking at a rate of five to six percent sequential GDP was growing again. And we’ve had more than two million private sector jobs created since the economy started, growth started again. That’s a pretty good record of job creation and it’s nowhere good enough because millions of Americans are still out of work.
COOK: (Inaudible) that this is an economy in real trouble right now.
GEITHNER: The economy is absolutely weaker than it was in the beginning of the year, but it’s weaker because for two reasons. One is because we’re still healing from a terribly difficult financial crisis. And it’s difficult because again oil prices put a huge amount of pressure on a weak economy, but the damage caused from Japan was global in its effect on slowdown. Europe has put enormous pressure on financial markets and concern, reigniting a whole weight of caution.
And on top of that we had the self-imposed trauma of a terribly damaging debate about default for the United States of America, a terribly damaging debate and that took a huge blow on confidence. Because of those things the economy has been slower than anybody expected, but the economy is still growing and with actions the President proposed last night it will be stronger. And that’s why we want Congress to move.
COOK: We haven’t talked to you since the downgrade. Do you feel vindicated by what’s happened in the Treasury market since then?
GEITHNER: I have enormous confidence in the basic strength of the American economy over the long run, and no doubt we have - it is completely within our capacity to make sure we return to live within our means. It won’t happen on its own though. Congress has to make sure that they are locking in reforms on to entitlements, the healthcare spending, to other spending across government and tax reform that will help get our fiscal deficits on a more sustainable long-term path, but I am absolutely confident that we’re going to be able to do that. And I think the world is confident of that.
If you look at the reactions of markets around the world to even the pressures we’re under right now, there is enormous confidence around the world that this country, our country is stronger than our political system looks today. We’ve got to get the political system to catch up to the underlying strength of the economy and do the kind of things we need to help heal the damage caused by the crisis.
COOK: What about what’s happening here in Europe? There were concerns about what’s happening here spreading to the United States. We have markets telling us 90 percent chance roughly of Greek default.
GEITHNER: Well, I think Europe’s still under enormous pressure and they have a really very difficult challenging set of problems they’re going to deal with over a long period of time. And it’s not just of course what’s happened in Greece, and Ireland and Portugal. I think the basic lesson of the financial crisis is you need two things for them to work.
First of all you need reforms that address [in a line from] make growth stronger, fix weak financial systems. Those have to be very powerful, very credible, sustained over a long period of time. That is necessary, but it’s not enough.
Those need to be backed by very, very powerful, unequivocal financial force so that governments have the time to make those reforms work. Now you can’t do the money without the reforms and you can’t do the reforms without the money.
And what Europe is trying to do is to make sure that those reforms underway are supported by very substantial committed resources, and they’ve got some more work to do in that area. They -
COOK: Yes. Are they moving fast enough?
GEITHNER: They’re moving, but I think they’re going to have to demonstrate to the world they have enough political will. This is not a question of financial or economic capacity. The - even if you take a very conservative, pessimistic estimate of the ultimate cost of resolving this crisis for Europe it is completely within the capacity of the stronger members of the euro area to absorb those costs.
Those costs will be much, much greater for them for their economies if they were to sit here and do nothing. And I think they recognize that. So this is a good, sensible financial calculation for them that the overall costs for their economy is long term will be less if they act more forcefully now.
COOK: Is it in the national interests of the United States to ensure that the euro survives?
GEITHNER: Absolutely. I think it is absolutely in the interests of the United States that the Europeans do whatever they can to help make sure they bring this pressure, they sort of calm the pressures now spreading across Europe, very important to us and the world economy as a whole. It was very, very damaging in the American economy last summer and so the cause of the slowdown we had last summer. It’s been a significant cause to the slowdown we’ve had this summer and I think it’s very important to the world that Europeans do what they need to do so that their - the problems they’re facing don’t spread, don’t add to the pressures on the world economy as a whole.
Now you know the Americans have put some pressure on the world economy as a whole too, the damage, the debt limit debate that we had in the United States I think it hurt confidence around the world, not just in us, but more generally. So we’ve been a source of complications for governments too in this case, but we have a huge interest in helping the Europeans through this and we’re going to everything we can to encourage them to act more forcefully and make it easier for them to do that.
COOK: Will we see concerted action from the G7 coming out of this meeting?
GEITHNER: Oh, not at this meeting. I don’t think you’re going to see that. I think you’re seeing that governments around the world in reaction to a slower economy globally with no - the US has slowed. What’s remarkable about this is the slowdown has been broad based around the world.
You’re going to see governments everywhere, central banks everywhere recalibrate and decide where they have room to look for things they can do to help strengthen real growth. And that’s going to come gradually over time, but I don’t think you should expect from this meeting any dramatic change and signal.
What we’re doing all the time, and we spend a lot of time on the phone together between meetings. I certainly do all the time is what we’re going to continue to do it explore ways we can help the Europeans get ahead of this problem. And of course we can’t want it more than them. It has to come from them fundamentally. We can help and we’re spending a lot of time, Peter, in trying to help them think through how best to manage this.
COOK: Really quickly, on the regulatory front you wrote in your FT op-ed today that the enforcement, the implementation of regulatory changes in the wake of the financial crisis shouldn’t impede growth. There are suggestions in the United States Dodd-Frank is doing exactly that. Are you willing to revisit Dodd-Frank and its implementation?
GEITHNER: There’s no credible argument in my view that the reforms that Dodd-Frank calls for and that we’re starting to implement in the United States would carry that risk. And that’s because we try to be very careful not to overdo it.
Now we are going to force things a little more capital against risk. That is a necessary thing to do, not just to prevent the next crisis, but make sure banks are able to help support an expanding economy. And because we were so aggressive early the US financial system is much stronger now and a much better position to help support growth, but we want to be careful that we don’t overdo it. And so we need to bring a kind of care and balance to this process so that understandable effort, the noble effort to make sure we’re preventing a next crisis doesn’t get in the way of healing the image from the last crisis.
COOK: A final question. This is our last opportunity, first opportunity to talk to you since you decided to stay at the Treasury. Any regrets?
GEITHNER: Oh, I think it’s a deep privilege for me to work for this President. We had a lot of challenges. He asked me to stay in a time where we’re facing so many challenges. We have Americans dying for their country around the world. How can you not when the President asks? So I have huge confidence in him, totally committed to his agenda, policy, and we have a lot of work to do. And it’s my privilege to do it.
COOK: All right. Mr. Treasury Secretary, thank you for the time. Appreciate you joining us.