Secretary Tim Geithner Discusses the 'Healthy, but Slow' Economic Recovery

Photo: Geithner: Govt. Still Lacks Capacity to Deal With Future Crisis. In an exclusive interview, Treasury sec. makes case for new regulations on banks
Geithner: Govt. Needs Better Crisis Management Tools.

The following is a transcript from ABC News' Terry Moran's interview with Treasury Secretary Timothy Geithner. Secretary Geithner talked about President Obama's plan for new financial regulations.

TERRY MORAN: Good. So in a nutshell, what is this proposal trying to accomplish? What's the vision here?

SECRETARY TIMOTHY GEITHNER: We need to prevent a crisis like this from ever happening again. You know, this crisis was enormously damaging to the basic lives, businesses, people across the country, across the world, and our basic obligation and our core mission is to make sure we put in place safeguards to make sure this never happens again.

MORAN: So with this proposal can you assure the American people that there will not be that kind of financial collapse, catastrophe again?

GEITHNER: I think if we legislate these reforms and we put these proposals in place and we get other countries to come with us, I think we have a very good shot of making sure that nothing this severe happens again.

MORAN: Why? What in this package today would have prevented what happened last fall?

GEITHNER: Two key things, well, maybe three key things. The first is we need to give consumers better protections against the risk they get taken advantage of. Sold products they didn't understand, take on too much debt, debt they can't afford. That is critical. That's the first most important thing.

The second is to make sure that banks can't take on this much risk and other institutions can't take on risk that threatens the basic fabric of the economy. And so we've put in place much stronger protections, safeguards, stronger constraints on leverage, capital requirements, shock absorbers to reduce the risk that ever happens again.

And the third because we're not going to be able to prevent risk taking everywhere, we're not going to be able to prevent all crises in the future, we need to have better capacity to manage them so we're proposing new authority, not just here but with other countries, to better manage the failure, potential failure of large institutions. Those are the three core things.

MORAN: Now one of the things you're already hearing is that in the effort to protect the system you're stifling it. Too much new regulation and you'll crush the life out of the financial system.

GEITHNER: We've got to get the balance right. I don't think we had it right. So we want to achieve more stability, more protection for the average consumer, average business person, but still preserve what's the great strength about our system which is a great capacity for innovation, for competition.

One of the things we do better than any country in the world is to take the savings of investors, of Americans, and channel them to companies – people that have an idea, want to finance a growing business.

We are excellent at that and we need to make sure we preserve that basic ability, so we have innovation going in the future, but we need a better balance, more stability, too. That's the art in this and we're going to try and get that balance right.

MORAN: One of the things that happened was, as the president just said, there were these new fancy financial instruments and had multiplied to mountainous levels. How will this package of proposals stop the next derivative, the next financial instrument from infecting the system?

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