As members of Congress continue negotiations over financial reform today, Treasury Secretary Timothy Geithner said he believes they will reach a bi-partisan deal that will contain strong reforms to prevent another financial crisis.
In an interview with "Good Morning America" anchor George Stephanopoulos, Geithner said he realizes there is still "enormous resistance" from the financial community, but the government has an obligation to enact reform.
"That's why it's been so hard to get this done, because people recognize this is very tough. It's going to transform the role of our financial system in the economy and make it much more stable, give people much more protection," Geithner said.
President Obama heads to New York City today to make his case in Wall Street's back yard for additional regulation of the financial industry.
The Treasury Secretary said the legislation in negotiation needs to address the size of the banks, which many experts believed in 2008 were too big to fail in 2008. Today, the six biggest banks in the country have assets equal to more than 60 percent of the GDP of the United States.
"Our view is that we need to make sure that you're limiting how big they can get and how risky that they can get. But if, in the future, if they mess up and they take themselves to the edge of the cliff again, then we want to make sure we can put them out of existence, dismember them, break them up safely without the American taxpayer having to bail them out again," Geithner said.
The possibility of taxpayers footing the bill for the banks again has been raised during the debate over the financial regulations overhaul. Democrats support the creation of a $50 billion fund which banks would fund. That money would then act as an insurance policy should the banks fail again. But Republicans have argued that the fund is just another bailout, and if it does not cover the banks' losses, then the taxpayers would again be on the hook for the remainder of the money.
Geithner said both parties agree that taxpayers should never again bail out financial institutions, but said it is necessary to have a system in place where "we can fail them safely."
"We can put them…through a form of bankruptcy and not have the taxpayer exposed to any risk of loss," Geithner said. "So if the government is ever exposed again to taking any risk in these things, cleaning up these messes, we want to make sure that the banks are the ones paying for those costs."
The Treasury Secretary said that if reform legislation passes, the government will never again step in and save the banks because "you can't run a system in which private investors or their executives can take risk on the expectation the government is going to come in and protect them."
Today, the six biggest banks in the country have assets equal to more than 60 percent of the GDP, according to the National Information Center.
"That's a recipe for disaster," Geithner said.
The news that Goldman Sachs made $3.5 billion in quarterly profits, which was released days after the Securities and Exchange Commission announced investor fraud charges against the company, is seen as one of the turning points in generating public support for financial reform.