'This Week' Transcript: Timothy Geithner

ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS"

MARCH 29, 2009

SPEAKERS: GEORGE STEPHANOPOULOS, HOST

SECRETARY OF THE TREASURY TIMOTHY F. GEITHNER

[*] STEPHANOPOULOS: Good morning and welcome to "This Week."

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: We put in place a comprehensive strategy designed to attack this crisis on all fronts.

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STEPHANOPOULOS: Our headliner this morning, the man behind Obama's plan.

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GEITHNER: We made some significant progress.

We have a moment of opportunity now.

We believe we have to provide very substantial forms of financing.

(UNKNOWN): Today we love Geithner. Two weeks ago, we didn't like him. We thought he was nothing. Today we like him. He's a genius.

(END VIDEO CLIP)

STEPHANOPOULOS: In his first Sunday interview, the secretary of the Treasury, Tim Geithner.

Plus, Geithner's most prominent critic.

(BEGIN VIDEO CLIP)

PAUL KRUGMAN, NEW YORK TIMES: It's a plan to rearrange the deck chairs and hope that that keeps us from hitting the iceberg.

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STEPHANOPOULOS: Nobel Prize winner Paul Krugman joins our roundtable, with George Will, Cokie Roberts and Matthew Dowd.

And as always, the Sunday funnies.

(BEGIN VIDEO CLIP)

(UNKNOWN): Michelle Obama's planting a vegetable garden on the White House lawn. You know the economy is bad when the Obamas are afraid of running out of food.

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STEPHANOPOULOS: Hello again. Last week, he was under fire; this week, he was everywhere, rolling out new proposals to shore up America's finances. And today, Treasury Secretary Tim Geithner joins us for his first Sunday morning interview. Welcome to "This Week."

GEITHNER: Thanks, George. Good to be here.

STEPHANOPOULOS: So you lay out the first phrase of the bank plan back in February. The Dow drops 382 points. This week, you laid out the new phase of the bank plan, 500-point rise over the course of the week. Do you feel like the comeback kid?

GEITHNER: George, we're facing still a lot of challenges. Can't judge a plan on the reaction one day one week. But we've done a lot in these eight weeks. You know, the president's housing plan has already helped bring down interest rates. Millions of Americans now are going to be able to take advantage of lower interest rates. If you take a typical family living in a $180,000 home, the rate reductions we've already seen could save them as much as $2,000 a year.

STEPHANOPOULOS: And we did see a lot of encouraging signs in the economy this week. New home sales were up. Mortgage refinances, as you pointed out, were up. Even durable goods orders were up, and inventories went down. And of course, a 20-percent rise in the stock market over the last couple of weeks. What does this tell you? What should Americans know right now about where the economy is and whether recover is in sight?

GEITHNER: Well, these are encouraging signs, and it's good when you see the new surprise on the upside, rather than the other way.

STEPHANOPOULOS: So you were surprised?

GEITHNER: Well, I think these are, again, they came in above expectations, much (inaudible) -- that's a very good sign. But it's very important for people to understand that, you know, it took us a long time to get into this mess. It's going to take us a while to get out of this. Progress is not going to be even. It's not going to be steady. The really important thing is that the administration is going to do what is necessary working with the Congress to making sure we're putting in place very powerful programs to get Americans back to work.

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STEPHANOPOULOS: So you're barraged by economic statistics every day. I'm sure there are a bunch of screens in your office. What is the single most important statistic that you are looking at, that you're tracking to say, when this turns, we're out of the woods?

GEITHNER: There is no single number you have to look at. You need to look at what people are doing with the income and the savings they have. Are they spending? Are businesses expanding? Are they hiring more people? Are interest rates coming down? Is credit starting to flow again? You have to look at that broad suite of things. There's no single number that gives you the health -- the measure of the health of the economy.

STEPHANOPOULOS: What is the next shoe to drop? In talking to business leaders over the last couple of weeks, I hear a lot of concern about the commercial real estate market. And from bankers especially, they're concerned that as unemployment rises, their credit card defaults could really go through the roof?

GEITHNER: There's no doubt there's more losses ahead for the financial system, but George, we've had a lot of adjustment already. One of the things about the American economy is, change happens here with brutal force, much more quickly than it happens around the world. And we've already had -- you know, we're 18 months into this, and we've had...

STEPHANOPOULOS: It's a long recession.

GEITHNER: It is a long recession, and it's a -- it's been dramatic and painful and brutal in some ways, in part because adjustments happen here so quickly. But that's a good thing too, because that means more of that adjustment process is behind us.

Now, the important thing, though, is that we keep at it. You know, the big mistake governments make in recessions is they put the brakes on too early.

STEPHANOPOULOS: Is that what happened during the depression? Is that what Franklin Roosevelt did?

GEITHNER: That's one thing that happened in the depression. It's happened in Japan, too. It's happened in a lot of countries in the world. They see that first glimmer of light, and the impetus to policy fades and people are putting on the brakes, and we're not going to do that.

STEPHANOPOULOS: But I wonder about, as you look in the long term -- and you believe we're obviously going to come out of this at some point. You believe the recovery will start, what, the end of this year?

GEITHNER: Most private economists believe you're going to find a more durable bottom in the second half of this year and then have growth come back.

STEPHANOPOULOS: But even if we come out of that, a lot of economists worry that this recovery is going to feel like a recession, that we're going to have a jobless recovery. Very -- I see you nodding your head. You believe that?

GEITHNER: I think a lot -- people worry about this. You have a recession like this, which is born out of a period where people borrowed too much, and we let our financial system take on too much risk. The risk in that conduct is you have a longer, slower, more gradual process of adjustment and recovery.

STEPHANOPOULOS: And some experts believe that we're really entering a brand new world. I was struck by a piece of research I saw from a branch of Citigroup. This was -- and I'm going to share it with our viewers. They're saying, "Don't be in a state of denial, we are really entering a brand new economic world even after the recovery, because for so long the U.S. has been acting like a leveraged hedge fund."

And they go on to say: "Not only is the lifestyle and wealth creation likely to be unsustainable going forward, but if you believe, as we do, that we've been operating in a leveraged economy, then the new normal in terms of economic data, profitability of companies, et cetera, may be a shadow of the past."

So do Americans have to get used to the idea that the boom times really aren't coming back?

GEITHNER: Well, we're going to emerge out of this stronger. And we're going to do that because the president and the Congress are going to make sure that we have the government doing a better job of things it needs to do.

So we have a more productive economy in the future, better education outcomes, better health care system, better energy policies, stronger infrastructure.

STEPHANOPOULOS: Stronger, but as affluent as we were in the past?