Transcript: Treasury Secretary Timothy Geithner and Alan Greenspan

If we had been -- the clunker program had been put in place six months ago, it would have probably been a dud.

STEPHANOPOULOS: Well, that's interesting because, you know, you also saw, about five months ago, the administration also putting out a credit for first-time homebuyers.

Has that made a difference?

GREENSPAN: I think it has, but the problems in homebuilding and home sales and mainly home prices is much broader than that. In fact, the way I would define it is that, unless home prices stabilize within, say, maybe, 5 percent down from here, we're going to run into some...

STEPHANOPOULOS: Well, the Case-Shiller has shown that they probably have stabilized some.

GREENSPAN: Well, they have stabilized temporarily. And the problem with the data on home prices is they're very difficult to measure in their regional data.

It is possible. I don't think it's going to happen, but I do think it is possible that we could get a second wave down. But the important issue is, if we don't -- and I think the probability is that we won't, that we are close to stabilization.

Under those conditions, you will begin to get a very significant change in the underlying confidence in the consumer area.

STEPHANOPOULOS: And then you might see that in the consumer area; you might see that in the stock markets. So that is the -- is the trigger, possibly -- you say it's unlikely -- that that could be the trigger to a second dip?

GREENSPAN: If you get another dip and a renewed decline in prices, we're going to run into an acceleration of a number of homes that are mortgaged and are underwater; that is that the value of the properties are less than the debt.

If that happens -- and, clearly, looking at the structure of where debt and values, it would, if, for example, home prices fell by 10 percent or more, that would create a major acceleration in foreclosures. And I think it could be a factor...

(CROSSTALK)

STEPHANOPOULOS: On the other side, what's your best estimate right now of when we're going to see that kind of economic growth that can create jobs, above 2.5 percent, 3 percent, 3.5 percent?

GREENSPAN: Well, first of all, let me just say this, that the unemployment rate is going to continue to rise, but more slowly than it's been. We'll continue to have job loss, but that's slowing as well.

It strikes me that we may very well have 2.5 percent in the current quarter, and the reason is that there's been such an extraordinarily high level of inventory liquidation that the production levels are well under consumption. And as that slows down -- as it has to, I mean, you can't go below zero on inventories -- production moves up, and that could be quite significant.

So I wouldn't put out of the question that...

(CROSSTALK)

STEPHANOPOULOS: So you're fairly optimistic right now.

GREENSPAN: I'm short-term optimistic, but with many caveats. The home price issue will be a critical one, and then, as you heard me quoted on earlier, the deficits...

STEPHANOPOULOS: That's what I want to press you on, because you watched Secretary Geithner there. He says the administration takes it seriously, they're going to do what it takes. Two questions on that. Do you believe that this health care reform that is now being debated is part of the solution to deficits? And number two, must new revenues be on the table?

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