Treasury Secretary Timothy Geithner told Congress today that while a severe economic crisis in Europe could cause harm in the U.S., major banks here have reduced their risk over problems in the European economy.
“U.S. financial institutions, including our major banks, the money market funds as a group, have substantially reduced their exposure to the economies of Europe that have been under the most pressure,” Geithner told the Senate Banking Committee. “Our direct financial exposure to these governments and their institutions is quite small, but it’s important to recognize that Europe is so large and so closely integrated with the U.S. and the world economies that a severe crisis in Europe could cause significant damage to growth here and around the world.”
The Obama administration has urged European leaders to deal more forcefully with a debt crisis that could significantly damage the U.S. and global economy.
“Developments in Europe can have big effects on the United States economy, big effects on confidence, big effects on financial markets and we’re living with the pressures today,” he said. “And they have hurt growth here, and they have reduced expectations about future growth.”
Geithner told the committee the U.S. needed to take action to stimulate growth and called for the passage of the president’s American Jobs Act.
“Now, in the face of situation in Europe and the general slowdown in growth around the world, the most important thing we can do here in the United States is to act to strengthen our economy,” he said.
Geithner also told the senators he expected the housing crisis would not end anytime soon.
“Things are still terrible. And this is going to take years still,” he said. “And what you see now is two things: You see the broader weakness in the economy, unemployment above 9 percent, income growth slower.”
The Treasury secretary said that puts additional pressure on the housing market. “It’s all hurting housing demand, slowing the pace, making more people vulnerable to losing their homes,” he said. “But even apart from that, we still have a foreclosure process essentially broken, a servicing framework that is not doing a good enough job at helping people stay in their home or transition to other forms of housing.”