Geithner Addresses Economic Relations Between U.S. And China

By Robert Hune-Kalter-Talk Radio News Service

Treasury Secretary Tim Geithner testified before the Senate Finance Committee Thursday on U.S.-Chinese economic relations. Some issues discussed where China’s continued manipulation of their currency, the delayed exchange report policy, and the Chinese piracy of American software.

“Our policy towards China is about protecting the interests of the United States, our national security interests and our economic interests, and our strategy is to expand opportunities for American workers and American businesses,” said Geithner.

Chairman Max Baucus (D-Mont.) expressed concern that there is no strategic and coordinated United States economic policy in respect to China and that different government agencies are using different non-policies.

“It reminds me of a football team. You have a quarterback and fullbacks and running backs, and so forth, and if they don’t all run according to the same play that’s called, that team loses,” said Baucus. “I’m not saying this is a situation we want to win at China’s expense, I’m just saying we don’t want to lose.”

Sen. Ron Wyden (D-Ore.) supported China’s succession into the World Trade Organization. He believed it would be better for the Chinese to be inside a rules based trading system and it would be good for American exports. The Chinese agreed to join the government procurement agreement ten years ago.

“By my calculations, at least five of your predecessors have been slow-danced by the Chinese. We seem to constantly be in this situation, where someone in your position gets slow-danced off the dance floor,” Wyden said.

Geithner did not offer a timetable for when the final report on exchange rate policy would be complete, despite the request by the committee.

“We have put these economic issues at the center of our concerns in the relationship with China,” said Geithner.

Is The Recovery Act Really Helping?

By Celia Canon- Talk Radio News Service

Secretary of the Treasury Timothy Geithner

Treasury Secretary Timothy Geithner testified on the financial situation and on the American Recovery and Reinvestment Act today.

Geithner said that “There are important indications that our financial system is starting to heal.”

Signs that we are on the right path include ”New securities issuance has started to revive, Spreads for AAA credit card receivables asset-backed securities (ABS) have fallen about 330 basis points from there peak. There has been more issuance of consumer ABS in the past two months than in the preceding five moths combines,” said Geithner.
loans of similar types, duration and interest rates.”

Starting with the subprime mortgage crisis in 2007, “Unexpected losses experienced by major banks on mortgage-back securities set off a vicious cycle” as Geithner describes.

As a result, the government implemented the American Recovery and Reinvestment Act (ARRA) in February 17, 2009.

The act provides transparency and accountability so that taxpayers know where every dollar is going. Additionally, the ARRA “is giving 95% of working Americans a tax cut, creating or saving 3.5 million jobs, providing nearly 4 million students with a new higher education tax and helping 1.4 million Americans purchase their first home by providing $6.5 in tax credits,” said Geithner.

In terms of lending, which was significantly cut as banks lost their capital, Geithner said “The recovery program included any substantive increasing guarantees and a reduction in fees for small businesses lending programs, and we’ve seen lending under those programs increase 25% since the Recovery Act was passed.”

Sen. Christopher Dodd (D-Conn.), Chairman of the Senate Banking Committee, mitigated these arguments by saying, “I think the picture remains mixed after losing some 5.1 million jobs since the recession began.”

Geithner concurred, and added “In many parts of the country, many people don’t feel it’s getting better yet, they don’t really feel that the availability of credit is improving.”

“Treasury is continuing to look into additional metrics that gauge the markets more broadly, as well as additional economic metrics, to determine the effectiveness of the current strategy and whether additional or different steps are needed,” Geithner said.

Paulson defends objectionable decisions

Treasury Secretary Henry Paulson said that although some of his decisions have been unpopular, they have been essential to preserving the free market system.

"Some of the things that I've been part of have been very, very objectionable decisions but they've not been difficult decisions because they are much [better] than the alternatives," said Paulson during a forum on business and policy issues sponsored by Fortune magazine.

When asked if there was any line that he would not cross in order to protect the economy, the Secretary was reluctant to answer.

"You're not going to get me to say 'never' and tell you where I'll draw the line, because if you were to ask me the question a year ago, I would have drawn the line in a different place than I actually did when I was faced with the choice."

Paulson explained that in order to combat the recent economic setbacks, there are several steps that need to be taken, such as creating more effective regulation in the financial system, establishing authorities to deal with non bank institutions, and updating infrastructure to better handle OTC derivatives. The Treasury Secretary contended that taking these actions warrants more immediate concern than finding the origins of the crisis.

"We don't want to rush to a quick conclusion...we should be focusing on getting through the night first and then when recovery is well underway we can look in the rearview mirror and really understand the nature of the problem."