Treasury Secretary Timothy Geithner Sunday saw encouraging signs for the recession-hit U.S. economy and said it was too early to say if he was going to ask Congress for more stimulus money as the economic stimulus package announced so far slowly makes it mark in the economy.
In an interview to CBS program Face the Nation, he said there were encouraging signs that the recession-hit U.S. economy is showing signs of recovery but said that progress toward correcting the economy is not going to be even. We're going to have fits and starts. There will be a period where it feels very bad and uncertain but we need to keep acting as forcefully as we can to get banks lending again, he said.
Among the encouraging signs he saw, Geithner pointed to mortgage interest rates, which, he said, are now at their lowest point in history allowing millions of Americans to refinance their homes, and take advantage of lower interest rates. That's cash in the hands of the people, and that's very powerful, he said.
Geithner's interview came shortly after the House of Representatives voted 247-171 Wednesday to give the Treasury Department the power to restrict bonuses and compensation at companies receiving Federal Reserve bailout money.
The Pay for Performance Act of 2009 would prohibit the companies paying all employees, not just executives, unreasonable or excessive compensation until the bailout money is paid back.
The Treasury Secretary indicated that job losses might get worse before improvement is seen. He said unemployment rate may go above its current 25-year high of 8.5 percent, but noted that the United States and other countries must keep moving forward in making steps toward economic recovery. He said the typical pattern of an economic turnaround dictates that only when businesses start to hire again will there be a peak in unemployment.
He said the government stands ready to force out banking bosses and install new management if their companies have to return for more bailout money. He denied that the government was trying to evade congressional restrictions on executive compensation, after media reports said officials were worried that banks could be deterred from coming forward for federal help.
On criticism that banks might not take it kindly to a new public-private investment fund designed to clear out toxic assets, if the assets cannot command a healthy price, he said that the administration is determined to do whatever is necessary to make sure that the banking system emerges stronger. However, he parried a question about whether the U.S. administration might force banks to sell their distressed assets.
Banks have a large incentive now to clean up their balance sheets, to make it easier for them to go raise equity from the markets, from private investors, he added.
He said there would be strong conditions for any company requiring additional taxpayer money. If in the future, banks need exceptional assistance in order to get through this, the Treasury Secretary said it would then ensure that assistance comes with conditions, not just to protect the taxpayer, but to make sure this is the kind of restructuring necessary for them to emerge stronger.
If that requires a change of management of the board, the government would do that, he added while noting that the they overhauled the boards of mortgage giants Fannie Mae and Freddie Mac and insurance company AIG.
Geithner also defended President Barack Obama's decision last week to remove the chairman of ailing U.S. automaker General Motors after the administration was accused of adopting double standards by being more lenient on financial institutions also receiving federal assistance.
General Motors is going to be part of this country's future, he said, reiterating President Obama's call for a strong American auto industry that will require very substantial restructuring for which the administration is prepared to help make that process work.
We're prepared to explore all options to make that possible, but our test is, what's going to work? What's going to allow them to emerge from this strong enough so they can survive without assistance from the government on an ongoing basis? Geithner said.
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