Monday
May182009
Navigating through the Road Bumps in the Financial System
Monday, May 18, 2009 at 6:25PM
By Courtney Ann Jackson-Talk Radio News Service
We can’t let things go back to the way they were with the United States Financial System according to Treasury Secretary Timothy Geithner Monday. Geithner joined Newsweek Magazine editor, Jon Meacham, at a luncheon interview on the topic of the recession and what American’s should expect as the steps to recovery continue to be put into action.
“This is still the most challenging economic crisis that this country has seen in generations. It took a long time for these problems to build up," Geithner said. "It’s going to take time for us to work through them. We’re not going to have a steady, even process of repair, it’s going to be bumpy, still feel fragile for a while.”
Geithner expressed his sympathy for struggling Americans and said he understands why Americans are angry. He said that even as growth inevitably begins to turn positive, unemployment will continue to increase for awhile. He also said, “It’s not going to feel better for a long time for millions of Americans.”
As the administration continues to work its way through this economic crisis, Geithner believes they need to take a “fresh look” at the financial system as a whole. In terms of speed and quality of initiative that are already in progress, he said he thinks the administration is doing well.
“The American people want to see us moving to change things, not just waiting and hoping,” he said.
Meacham asked Geithner about people’s critique that the administration was being too lenient. Geither replied, “I actually think that what the President has put in place is the most aggressive approach to solving a financial crisis than we’ve seen from any serious country in a very long period of time.”
He also noted that they are doing more preventative work and referred to it as a type of insurance from a greater recession. They are working to make the system more stable and plan to release a new set of proposals in the next few weeks for reforming the oversight framework.
We can’t let things go back to the way they were with the United States Financial System according to Treasury Secretary Timothy Geithner Monday. Geithner joined Newsweek Magazine editor, Jon Meacham, at a luncheon interview on the topic of the recession and what American’s should expect as the steps to recovery continue to be put into action.
“This is still the most challenging economic crisis that this country has seen in generations. It took a long time for these problems to build up," Geithner said. "It’s going to take time for us to work through them. We’re not going to have a steady, even process of repair, it’s going to be bumpy, still feel fragile for a while.”
Geithner expressed his sympathy for struggling Americans and said he understands why Americans are angry. He said that even as growth inevitably begins to turn positive, unemployment will continue to increase for awhile. He also said, “It’s not going to feel better for a long time for millions of Americans.”
As the administration continues to work its way through this economic crisis, Geithner believes they need to take a “fresh look” at the financial system as a whole. In terms of speed and quality of initiative that are already in progress, he said he thinks the administration is doing well.
“The American people want to see us moving to change things, not just waiting and hoping,” he said.
Meacham asked Geithner about people’s critique that the administration was being too lenient. Geither replied, “I actually think that what the President has put in place is the most aggressive approach to solving a financial crisis than we’ve seen from any serious country in a very long period of time.”
He also noted that they are doing more preventative work and referred to it as a type of insurance from a greater recession. They are working to make the system more stable and plan to release a new set of proposals in the next few weeks for reforming the oversight framework.
Fed Chairman Bernanke Advises Fiscal Balance To Turn Recession Around
Federal Reserve Chairman Benjamin Bernanke testified before the House Budget Committee today concerning the current economic recession and warned that the retirement of the baby boomers and an increase in medical and entitlement costs makes it more difficult for the economy to be restored.
In his opening statement, Bernanke said that “Our expectation is that we will begin to see growth in the economy, so, at the end of the technical recession later this year. Underlying that prediction is some stablization in final demand, including consumer spending.”
Though there is hope that we will begin to see our economy turn around, Bernanke stated that unemployment rates will continue to rise into next year.
The American Recovery and Reinvestment Act (ARRA) was enacted by Congress and signed into law by President Obama in February 2009. This act is intended to provide stimulus to the US economy and is worth $787 billion. It includes federal tax relief, unemployment benefits, and domestic spending on education, health care, and energy.
Bernanke said, “by the end of 2010, the stimulus package (ARRA) could boost the level of real GDP between about 1 percent and a little more than 3 percent and the level of employment between roughly 1 million and 3-1/2 million jobs.”
Recently, the credit markets have also taken a downturn, one of the worst since the Great Depression. When Bernanke was asked by the committee how long it would take for additional credit to be made available to consumers and small businesses he said that though this group rely heavily on bank loans, banks have been reluctant to extend credit because they are concerned about their own financial positions.
“We’ve heard complaints that bank examiners from the Fed and other agencies are too prone from preventing banks from making loans, in the interest of safety and soundness... Making loans to credit worthy borrowers, maintaining credit relationships, is profitable, for banks and therefore good for banks,” Bernanke said.
To avoid the another recession as large as this one, Bernanke stated that there needs to be a stronger oversight of large firms, resolution regimes to help resolve failing firms, and to strengthen the financial infrastructure.