A year after the collapse of Lehman Brothers, Treasury Secretary Timothy Geithner spoke to "Good Morning America's" Diane Sawyer today about the state of the economy and why he is optimistic about the country's recovering from the worst economic crisis since the Great Depression.
Geithner addressed the difference between now and a year ago, when the collapse of Lehman Brothers signaled the start of an economic plunge.
"It's dramatically different," Geithner said in his first morning-television interview. "You know, a year ago, we really were on the verge of a full-scale run, a classic panic. People were starting to think about taking their money out of banks. It hadn't happened in a century. There was just real fear … economic activity effectively stopped around the world. Things just came to a grinding halt."
Geithner said that while he cannot guarantee that another economic crisis will never happen again, the government has an obligation to establish policy to help avoid a repeat.
President Barack Obama Monday called for immediate congressional action on regulatory reform during his speech at Federal Hall in New York City's financial district, legislation that has been sidelined during the health care overhaul debate.
"The biggest challenge is to make sure we change the rules of the game so this doesn't happen again," Geithner said. "Rules that'll protect consumers better. Make the system much more stable. That's the obligation of governments."
Thousands of protestors took to the streets in Washington, D.C., this weekend to oppose the amount of money the federal government is spending.
The Treasury and the Federal Reserve have invested more than $4 trillion at its peak in 28 government programs to stem the financial crisis. The Congressional Budget Office predicts the U.S. deficit will reach $1.6 trillion by the end of 2009.
Geithner said the country found itself in this situation because it borrowed too much.
As of June 2009, China owns $776 billion of U.S. debt while Japan owns $712 billion. Britain and Russia own $214 billion and $119 billion, respectively, according to the U.S. Department of Treasury.
"We lived beyond our means," Geithner said. "Both as a country, many businesses did it, many families did it. Obviously the financial sector did that. And part of what's going to make this so hard to get out of this is we have to go back to a point where we're saving more. The government had to do some deeply offensive things to help contain the damage. And we will get out of that as quickly as we can."
When asked whether the Obama administration will have to raise taxes, Geithner said the American people should be confident in the government's response to the crisis so far.
"I think Americans understand that we have an unsustainable fiscal position," Geithner said. "That we're going to have to bring those deficits down over time."
But the secretary said the president remains committed to his campaign promise to not raise taxes on Americans earning less than $250,000.
"He feels very, very strongly about that," Geithner said. "And we can get our fiscal house in order. We can go back as a country to the point where we're living within our means without violating that basic commitment."