Geithner on Stabilizing the Economy...And Being One of 'Barack's Beauties'

WASHINGTON, May 18, 2009— -- The nation's economy has started to stabilize, but still faces a rocky road ahead, Treasury Secretary Tim Geithner said today.

"Things have clearly stabilized," Geithner told Newsweek editor Jon Meacham during a wide-ranging question-and-answer session at the National Press Club. "The pace of decline in most measures of economic activity has slowed quite a lot and that's an important beginning."

The Treasury chief cited thawing credit markets as one reason for optimism, but warned that it will be a long climb back after the economy "fell off the cliff" last fall.

"This is still the most challenging economic crisis that this country has seen in generations," he said. "It took a long time for these problems to build up. It's going to take time for us to work through them.

"You know, we're not going to have a steady, even process of repair," Geithner said. "It's going to be bumpy, still feel fragile for a while, and you know, there's just enormous pain and suffering across the country today."

Even once economic growth has resumed, Geithner predicted that unemployment, traditionally a lagging indicator, will take "a long time" to improve, with the country's jobless rate now at a 25-year high of 8.9 percent.

"I think even as growth starts to turn positive -- which will happen -- unemployment is going to keep increasing for a while," he said. "And it's not going to feel better for a long time for millions of Americans."

To prevent future crises, Geithner today reiterated the need for stronger oversight of the financial sector, forecasting that "a broader, comprehensive set of proposals" will be announced "in the next few weeks."

One "essential" measure, he noted, would be greater oversight of derivatives markets.

As the administration presses forward with financial regulatory reform, Geithner cautioned that limits should not be set on executive pay at companies receiving bailout funds, but instead a greater emphasis should be placed on long-term incentives, rather than short-term ones, to prevent excessive risk-taking.

Geithner: Don't Cap Executive Compensation

"I don't think our government should set caps on compensation," he said. "What I think we need to do is make sure we put in place some broad constraints on the incentives compensation systems create. You had a crisis magnified by the fact that people were paid to take a huge amount of short-term risk -- and that's something that's preventable."

"The returns were so appealing, so powerful, they basically overwhelmed all the checks and balances that are in place," he said.

Asked about his own salary, Geithner said it was under $200,000, "a generous salary, appropriate for a public servant."

While Geithner has been in place at Treasury for more than 100 days, there have been widespread concerns that his department remains understaffed and is suffering because of it, a charge he refuted today.

"I actually think we're doing quite well in terms of speed, quality of policy," Geithner said.

"These things always take longer than you expect," he added. "And if you look at the arc of confirmations in this administration, we're ahead of the curve in some areas. We're slightly behind in other areas. But even below that level, we've got some great, talented people."

People Magazine thought Geithner, for one, was great and talented in the looks department, recently naming him one of "Barack's Beauties."

When Meacham asked him how it feels to receive such an honor, a blushing, beet-red Geithner replied, "It doesn't feel particularly good, frankly."

"It doesn't make up for the challenge of being away from my family and other things, but you're so nice to bring it up, Jon," he said with a laugh.