Video: Geithner: U.S. recovery will 'take a while'

  1. Transcript of: Geithner: U.S. recovery will 'take a while'

    Welcome back to MEET THE PRESS .

    SEC'Y TIMOTHY GEITHNER: Good to be here.

    GREGORY: So good economic news, the economy grew a little bit in the third quarter; has a lot of people thinking things are getting better . And yet the market on Friday dropped pretty sharply. Does Wall Street think the recession is over?

    SEC'Y GEITHNER: I think it is a good number. It was -- the growth was broad based . It was investment, exports, consumption, housing for the first time. And it shows that, you know, just five months after the president came into office we got growths restarted. But it's just the beginning and we've got a ways to go. Unemployment's high and still rising . This is a very tough economy still for huge numbers of American's businesses, so we've got a ways to go, David .

    GREGORY: Do you think the recession is over?

    SEC'Y GEITHNER: That's the judgment the economists will make, and they won't know until years from now. But the real test of recovery will be when we have unemployment coming down, people back to work, businesses confident to invest again.

    GREGORY: What do people have to be braced for, despite this news?

    SEC'Y GEITHNER: Well, again, I think it's, it's, it's good news and it shows that when you act with force you can stabilize a crisis like this and, you know, start to repair the damage and bring things back. But this is going to be a different recovery than the past, because Americans are going to have to save more. A lot of damage was caused by this crisis. It's going to take some time for us to grow out of this. It could be a little choppy, it could be uneven, and it's going to take a while. But I think, again, this is encouraging signs.

    GREGORY: Difficult days still ahead?

    SEC'Y GEITHNER: Well, again, I think for large numbers of Americans and businesses, small businesses in particular, it's a tough economy .

    GREGORY: So more difficulty before it gets better.

    SEC'Y GEITHNER: Well, it's getting better. It's going to be better gradually, and we're going to make sure we keep at it until we have an economy that's growing again led by the private sector , of course, ultimately.

    GREGORY: Right.

    SEC'Y GEITHNER: You know, what the government did was to step in and make sure we're providing the tax cuts and investments necessary to arrest the crisis, get credit markets starting to open up again. And we did that, that plan worked. But we've got a ways to go before...

    GREGORY: But that's a big question, whether or not -- yes, you have growth for the first time in four quarters. But is any of this growth sustainable without government intervention ?

    SEC'Y GEITHNER: It will be, it will be. But what the government has to do in a crisis is to provide a bridge until the economy can repair itself and businesses are confident enough to start to invest again. And again, you're starting to see it again. Businesses now, I think they'll say -- you talk to people across the country, they'll say that they feel that things are more stable now and for the first time they see orders starting to pick up. And what'll happen is they'll start to invest again, they'll start to bring people back onto their payroll and this will get more momentum.

    GREGORY: But that happened hasn't yet -- hasn't happened yet. We'll get into that a little bit more in just a minute.

    The question about consumer spending that really drove the market down on Friday, it's off, biggest level that it's been off in nine months. Again, people are not consuming.

    SEC'Y GEITHNER: There's nothing new in those numbers on Friday. They were in the GDP report. No incremental news in those numbers. So again, the overall picture for the economy is that consumers are a little more confident now, confident enough to start to spend again, investments starting to spend again. You know, there was another number on Friday that showed business confidence , in the Chicago survey, showing a little more optimism about the future, too. And -- but, you know, again, this is a tough economy still, it's going to take some time. But we're committed to making sure we're reinforcing this progress we've seen.

    GREGORY: A hundred and fifteen banks have failed so far this year. Is the banking system safe?

    SEC'Y GEITHNER: The banking system is dramatically more stable than it was three months ago, six months ago, nine months ago, a year ago. Just remember, again, a year ago today, last year, you had for the first time in almost 75 years Americans start to wonder whether they should

    be taking their money out of banks. You had markets around the world come to a stop. Economic activity just stopped, came to a standstill, like flipping a switch. And right now you've had a dramatic improvement in confidence, you've had private capital come back into the system. And for large businesses, they can now borrow again and they can raise capital again, and that's very important. But small businesses , much more dependent on banks, they still face a really tough environment on the financing side, and we need to keep working to try to open up credit to them.

    GREGORY: Do we need another cash for clunkers program to stimulate the economy ?

    SEC'Y GEITHNER: I don't think at the moment -- well, let me start this way, David . About half of the money in the Recovery Act , tax cuts and investments, are still ahead of us. So there's a lot of force still moving its way through the system now, and you're going to see that continue to provide support for the economy going forward.

    GREGORY: Could you have had more impact if more of that money were paid out? You still have about $500 billion of the stimulus that has not been paid out yet. How long will it take to get paid out?

    SEC'Y GEITHER: Actually, I -- again, it was designed to pay out over two years, because we knew it was going to take a long time to repair the damage we started with earlier this year. So it was designed to pay out over this period of time. And I think it's actually delivering better results sooner than we would expect. I think we're seeing better outcomes in the financial sector , in the economy than many of us would've thought when we sat there with the president in Chicago at the end of last year.

    GREGORY: Right. Well, but that's not exactly true, because the president's team said you'd keep unemployment to 8 percent if you didn't have the stimulus, so.

    SEC'Y GEITHNER: No. No, you're right, the unemployment is worse than almost everybody expected. But growth is back a little more quickly, a little stronger than people thought, and growth is a necessary condition . With growth jobs will come, but growth has to come first. But just look at the financial sector . You know, you've had banks repaying money with interest. Taxpayers are getting substantial earnings on this big investment in the financial system , and that's delivering good, good returns for the American taxpayer.

updated 11/1/2009 11:16:09 AM ET 2009-11-01T16:16:09

Treasury Secretary Timothy Geithner acknowledges the federal budget deficit is too high, but that the priorities now are economic growth and job creation.

Asked repeatedly on NBC's "Meet the Press" whether this means taxes will rise, Geithner avoided giving specifics. He did say President Barack Obama is committed to dealing with deficit in a way that will not add to the tax burden of people making less than $250,000 a year.

The White House has not decided how to reduce the red ink, Geithner said in an interview broadcast Sunday.

"Right now we're focused on getting growth back on track," he said. "And we're not at the point yet where we have to decide exactly what it's going to take."

He acknowledged that the economic recovery, while showing positive movement, has been shaky and uneven.

"A lot of damage was caused by this crisis. It's going to take some time for us to grow out of this. It could be a little choppy," he said. "It could be uneven. And it's going to take awhile."

‘Dramatically more stable’
A bright spot in the recovery identified by Geithner is the banking system, which he said is "dramatically more stable" because of the government bailout.

Geithner said that just one year ago economic activity came to a standstill as major financial institutions shut down due to lack of liquidity.

Even though 115 banks have failed so far this year, Geithner said there has been a "dramatic improvement in confidence," with private capital back in the system. He said large businesses are now able to borrow again.

"The banking system is dramatically more stable than it was three months ago, six months ago, nine months ago, a year ago," he said.

But Geithner said more needs to be done to assist small businesses, adding that the administration is working to help open up credit to them. These businesses, he said, "face a really tough environment on the financing side."

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After financial institutions were widely blamed for assuming too much risk and bringing the economy to the brink of collapse, Geithner said a concern now is that they might end up being too timid.

"The big risk we face now is that banks are going to overcorrect and not take enough risk," he said. "We need them to take a chance again on the American economy. That's going to be important to recovery."

Geithner acknowledged the economy remains tough for many workers who have lost jobs and it's going to be some time before the employment outlook starts to brighten for many of them.

"Unemployment is worse than almost everybody expected. But growth is back a little more quickly, a little stronger than people thought," he said.

Unemployment still rising
Unemployment hit a 26-year high of 9.8 percent in September, and the October report due in the coming week could show it topping 10 percent.

"It's likely still rising. And it's probably going to rise further before it starts to come down again."

Geithner said it's too early to decide if a second government stimulus package should be offered, though he acknowledged unemployment probably will rise even more before it starts to turn around. Economists expect to see job growth after the first of the year, probably in the first quarter, he said.

"You're not going to see real recovery until it's led by the private sector, by businesses," he said.

The treasury chief added that with about half of the stimulus money left, along with tax cuts and investments ahead, "there's a lot of force still moving its way through the system now" and that will keep providing economic support. "It's working. It's delivering what it should result."

Last week, Christina Romer, who heads the president's Council of Economic Advisers, said the government's economic stimulus spending already had its biggest impact and probably wouldn't contribute to significant growth next year.

Geithner also said the administration supports steps being considered by Congress like extending unemployment insurance and the homebuyer tax credit.

In addition, he complimented Obama's pay czar, Kenneth Feinberg, for his work in reining in pay for senior executives at the top seven recipients of government bailout money. Geithner played down concerns about government interference in executive compensation and the potential for the most talented and productive executives to leave their companies.

"We were very concerned about that from the beginning. And he had to balance some very difficult kind of choices. I think he's found a very good balance among them," Geithner said.

Asked if he saw an exodus at those companies, he said he didn't, but added, "I worry about this a lot."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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