Geithner on Stabilizing the Economy...And Being One of 'Barack's Beauties'

WASHINGTON, May 18, 2009— -- The nation's economy has started to stabilize, but still faces a rocky road ahead, Treasury Secretary Tim Geithner said today.

"Things have clearly stabilized," Geithner told Newsweek editor Jon Meacham during a wide-ranging question-and-answer session at the National Press Club. "The pace of decline in most measures of economic activity has slowed quite a lot and that's an important beginning."

The Treasury chief cited thawing credit markets as one reason for optimism, but warned that it will be a long climb back after the economy "fell off the cliff" last fall.

"This is still the most challenging economic crisis that this country has seen in generations," he said. "It took a long time for these problems to build up. It's going to take time for us to work through them.

"You know, we're not going to have a steady, even process of repair," Geithner said. "It's going to be bumpy, still feel fragile for a while, and you know, there's just enormous pain and suffering across the country today."

Even once economic growth has resumed, Geithner predicted that unemployment, traditionally a lagging indicator, will take "a long time" to improve, with the country's jobless rate now at a 25-year high of 8.9 percent.

"I think even as growth starts to turn positive -- which will happen -- unemployment is going to keep increasing for a while," he said. "And it's not going to feel better for a long time for millions of Americans."

To prevent future crises, Geithner today reiterated the need for stronger oversight of the financial sector, forecasting that "a broader, comprehensive set of proposals" will be announced "in the next few weeks."

One "essential" measure, he noted, would be greater oversight of derivatives markets.

As the administration presses forward with financial regulatory reform, Geithner cautioned that limits should not be set on executive pay at companies receiving bailout funds, but instead a greater emphasis should be placed on long-term incentives, rather than short-term ones, to prevent excessive risk-taking.