Lois Romano Interviews Treasury Secretary Timothy Geithner
May 22, 2009

Monday, May 25, 2009 11:30 PM

ROMANO: Welcome, Treasury Secretary Timothy Geithner. Thanks for joining us today.

SECRETARY GEITHNER: Nice to be here.

ROMANO: So you are laying the groundwork for--for GM to be forced into bankruptcy, maybe as early as June 1st?

GEITHNER: Well, I wouldn't say it that way. What we're doing is helping this company , this critically important company, the American economy, put in place a restructuring plan that will not allow it to be--emerge viable without government support over the long term, allow it to continue to play this critical central role in the whole American experience.

ROMANO: But by the time you're done with GM, you will have invested, what, $45 billion? How much is too much?

GEITHNER: Well, the President has made it clear that we're prepared, if we see a restructuring plan with enough shared sacrifice that allows this company to emerge viable over time, that we're prepared to support that. We think that's a totally legitimate, appropriate use of public resources, given the cost to the American economy of allowing this company to go under, and so I think we'll do what's necessary, protect the taxpayer but allow these firms to emerge viable over time.

ROMANO: You have already asked for the resignation of one CEO. What's going to happen to Fritz Henderson? Are you going to ask for his resignation?

GEITHNER: Let me tell you the basic principle, but I wouldn't encourage you in that direction. [The] basic principle is that when companies get to the point where they have to come to the government and ask the taxpayers of the country to support exceptional assistance, then we have an obligation to make sure that the board and management of these companies are strong enough to lead the companies towards a stronger future. That's a basic obligation I think anybody would expect us to have. That's the way financial decisions are made in the private sector, and that's the approach we bring to these kind of difficult questions.

Of course, we do this with extreme reluctance, extreme care, only when we think it's the only option, but that's the basic principle.

ROMANO: So what's going to happen to Fritz Henderson?

GEITHNER: I think he's doing an exceptional job under difficult challenges--and that's what I'd say.

ROMANO: Okay, okay. The UAW has attacked GM's plan to boost imports from China, Mexico, South Korea, while closing 16,000 plants here, and Congress has set up some flares on this. How do you ensure that this money that you're putting into GM, you know, guarantees jobs and--and development here?

GEITHNER: Everything the President is doing is designed to improve the prospects of this company, its supplier base, or sustained level that would not be possible in the absence of government assistance, the government support in this case.

So the whole strategy we're embarked on is trying to preserve a viable company in part because you want to make sure that the--we limit the employment effects that would come if these companies were allowed to fail.

ROMANO: But how do you feel about them looking to these foreign nations for labor costs and imports and exports?

GEITHNER: You know, I think it's--I think this is hard to say now, but I think you need to wait until you see the full plans that will be announced on June 1st--that we expect to be announced on June 1st and people have a chance to look at the whole package, and everybody is going to want to evaluate the credibility, viability of the restructuring plan in that context.

You know, our basic objective, though, is to make sure--is to do what we can to help ensure these companies can emerge viable, remain an important part of the American economy.

ROMANO: Can the U.S. auto industry compete against foreign companies that have lower labor costs, fewer environmental regulations, minimal labor?

GEITHNER: We believe they can. I think this is true in automobiles, true across the American economy.

GEITHNER: The American economy--American workers remain among the most productive workers in the world, and we absolutely believe these companies have the capacity to compete on a global scale.

ROMANO: The United States government now owns part of an the insurance industry, part of the auto industry, part of the banking industry. How do you keep from making the micro decisions when you're making the big decisions about these companies?

GEITHNER: It's a very important question. We did not want to be in the business of running on a day-to-day basis any of these entities. We did not want to be in business of owning any share of these companies over the longer term. So everything we do will be designed to improve the odds that we get out quickly, taxpayers have no ongoing relationship, that we protect the taxpayers' interest in the near term, but that'll be our objective. We don't want to be in the business of running these companies.

ROMANO: In the last 24 hours, for example, Edward Liddy stepped down. Who's going to replace him?

Well, they're--they're starting a search process now with our support and encouragement, but I want to say that--that he did a great thing for the country. He's still there on the job, helping guide this company through a very challenging restructuring process. He's got, I think, the--one of the hardest jobs in the financial industry as a whole, and he did the government a great service by coming in and taking on leadership of this company in what were very dark days for the American economy in September of last year, and we're grateful to have him there, and that he's going to stay on until we go through a careful, thoughtful search process.

ROMANO: So--so the Federal Government, and you in particular, will have a role in--in finding a replacement for him given the investment?

GEITHNER: The board with the trustees' engagement will run a careful search process, and I'm confident they'll do their best to find somebody who is going to be able to take on that challenge.

ROMANO: But you get to sign off on it.

GEITHNER: Well, you know, in general, where we have a substantial stake and the taxpayers substantial exposure, we're going to want to--again, we want to make sure that there is strong leadership for these companies.

ROMANO: This week, the RNC apropos of [US stake is so many industries]--the RNC passed a resolution that Democrats are dedicated to restructuring American society along socialist ideals. How is this not socialism when we're owning huge stakes in a lot of these companies?

GEITHNER: I think--let me just say it direct--it's a ridiculous charge.

GEITHNER: Okay? We are in this because, we came into office, this Congress started with worst recession in decades, a very deep, damaged financial system, and we have had to do exceptional things to help protect the American economy, help fix this crisis, fix this mess.

Where we engage in these areas is with extreme reluctance and only because we think it's the necessary way to help reduce the risk of greater damage to businesses, to the basic fabric of the American economy. And I say where we do it, we'll do it only temporarily, try to make sure we get out as quickly as we can, and I think if you look at the broad thrust of the President's policies, they're designed to get this economy working better, to try to make sure businesses have a better broad environment which they can operate, that we emerge more productive in the future, and that's what's guiding the President's basic economic policies.

He's had to come in and fix a whole bunch of things which have been long-term neglect by the government, and we need to get this government doing things governments have to do but doing it better--in improving education outcomes, in reducing growth in health care costs; basic infrastructure of the country had suffered long-term neglect; creating a more energy-efficient, greener economy--those are things that this government needs to do. They're critical to making growth stronger in the future, more sustainable in the future, and they are critical in helping solve our long-term fiscal problems as well.

ROMANO: When would you like to see the government, you know, out of the business of these companies?

GEITHNER: As soon as we can.


GEITHNER: As soon as possible.

ROMANO: As soon as they can repay?

GEITHNER: As soon as possible. Again, you know, we came into this only with extreme reluctance to try to fix a set of problems we began with which were causing huge damage to the American economy, and we've been very careful--if you look at what we've done in the banking context, very, very careful to maximize the odds that companies are going to the private markets to bring in capital.

GEITHNER: So, if you look at just what we did with major banks, working alongside the Fed, they're out now--those that need additional capital are out there and are raising substantial amounts of equity from the private sector, so they don't have to come take it from the government.

ROMANO: You said this week that the public-private partnerships should be ready by July? Is that correct?

GEITHNER: Well, the--the Fed and the FDIC, which have a lot of the responsibility for putting in place the operational infrastructure, are working very hard to get those programs in place.

The Fed made an important announcement about extending financing to commercial mortgage-backed securities earlier this week. That's one important piece of this, but they're working on it, and we expect them to be in place relatively soon.

ROMANO: Have you had to go out there and sell this to the private investors┬┐..to convince them that it's a good deal to go into business with the government, in light of what's been happening, the political climate, what happened with AIG and the bonuses?

GEITHNER: You're right. There's still--there's still a bit of concern about whether, if you participated in these programs, you'll face in the future some change in the rules of the game, and that's causing a bit of--a bit of concern still, and we're going to work to limit that concern, but there's--there is quite a bit of interest in the--in the private investment community in participating, but we'll have to judge. We won't really know until it starts. People get to look at the entire package.

ROMANO: Well, what they're worried about is that [the private investors]are going to make some money┬┐.Then once they make the money, Congress is going to go crazy.

GEITHNER: Well, they're a good deal for the American taxpayer. That's the important thing to recognize -- -because you--you have in this basic structure, investors putting skin into the game, taking risk, making judgments about what the price should be for these securities, and the taxpayer gets to participate in the upside in those judgments. So we think they're a good deal for the taxpayer.

ROMANO: Okay. Let's talk about housing. The Federal Government has tried a number of programs to help struggling homeowners, to reduce the number of foreclosures, but yet, every month, foreclosures are at a record high. Is the problem bigger than the government can handle?

GEITHNER: Well, let me just step back for a second. You said we tried a number of progra We have put in place--I'll just mention three--which are very powerful and important progra

The first is a program working alongside the Fed to help bring down mortgage interest rates, and they are now at historic lows. That has hugely powerful effects across the American economy, helping reduce the risk--or the extent of likely further falls in housing prices.

The second was to make it possible for Americans to refinance even where the value of their house had fallen below the level when they purchased it.

That program, too, is up and running, and hundreds of thousands of Americans--ultimately millions we think--will be able to take advantage of that to refinance, take advantages of lower rates. That's more money in their pockets every month. It would not have been possible without these programs.

The third thing is to help--to set up a program to allow--to al low families to modify their mortgages, to reduce their monthly payments for a period of time, improving the odds they stay in their home. That's just getting started. You're just starting to see the benefits of this, but those programs will work, and they will benefit people that would not have been able to stay in their homes in the absence of this program.

However, you know, we came into this crisis in part because there was too much lending, and families across the country borrowed way beyond their means. And this program will not reach all those families, and it will not go to benefit a lot of speculators and investors that were trying to profit from the broader boom in housing prices.

But these are starting. They've already had some significant effects on interest rates, and they will help reduce the risk you have of foreclosures that should not have happened.

GEITHNER: Families that can afford to make their payments at a reasonable level will have the opportunity to do that and stay in their home.

But you're right. This is still causing a lot of damage across the country, and it's going to take some time still before those programs--to full reach the Americans that they are intended to reach.

ROMANO: You mentioned that Americans borrowed beyond their means. When you look at the collapse of the housing market, who do you--who do you think bears the greatest responsibility? I mean, is it the banks who are pushing these loans? Is it the consumers for, you know, borrowing over their means--I mean do the regulators? Where do you--where do you see fault lines there?

GEITHNER: Well, you know, for something this big and damaging to happen, it takes a lot of mistakes over time, and it's that combination of things. Interest rates here and around the world were kept too low, too long.

GEITHNER: Investors made--took a bunch of risk without understanding the risks. They were--they were betting on the expectation house prices would continue to grow up--to go up forever. Rating agencies failed to rate these products adequately. Supervisors failed to underwrite loans with sufficiently conservative standards. So those basic checks and balances failed, and people borrowed too much.

ROMANO: So there's plenty of blame to go around?

GEITHNER: There's a lot of blame to go around. You know, it takes a lot for something like this to happen.

ROMANO: Let's move into some personal questions and your being here and the toll it's taken.

For starters, you had a bumpy roll-out, bumpy introduction to the American people. The good news was that the White House stepped up and--and defended you, but was there a price attached to that? I mean, did you lose a little autonomy on that?

GEITHNER: Oh, I--I don't think so. You know, we have a--the President assembled a terrifically capable group of people on his economic team. You know, we meet with him every day. We go through strategy on the full range of economic challenges the country faces. It's a terrifically talented group of people. I'm privileged to be part of it, and I think that group has been able to do, working with the President and Congress, exceptional things in a very short period of time.

ROMANO: Since the beginning of this job, you've had a number of occasions where you've found yourself on the defensive, with the roll-out of the bank plan, with the AIG bonuses. How much of your job is figuring out policy and--and economics, and how much of it is--is gauging public perception and selling it politically?

GEITHNER: Well, they're all related.

You know, I spent a lot of time in this Department as a career civil service early in my professional life, and I worked with some great Secretaries, terrifically talented--

people, and I've always felt that the best policy gets made when you bring together not just the expert technical people but people who have the responsibility for not just negotiating and designing it but making it work in the Congress, explaining it to the American people.

So the best way to run policies is to bring all those people together and make sure Treasury and the White House are working very together on things that are hugely consequential for the country, and that's what we've done.

ROMANO: So--so you were prepared for--for the public nature of the job? It didn't catch you by surprise at all?


I've been living in this world for some time, and in a--in a financial crisis-- like in any challenging economic environment, you know, what people want to see is they want to see what you do.

GEITHNER: They're going to judge you by your actions. You have to earn your credibility. It only comes from when people have a chance to see what you do across a variety of circumstances. And so, you know, what we've tried to do is lay out our broad objectives early and then consistently put in place a set of programs to help fix the housing crisis, repair the financial system, bring the recovery stimulus money in place as quickly as possible. That's what we've done, and you're seeing significant early signs of stabilization in the economy, healing in the financial system, improving the confidence.

It's a beginning, just a beginning. We've got a long way to go, but I think you're seeing the benefits of that basic strategy, which is in a case like these governments have to act. They have to show that they have the ability to bring credible initiative to bear on fixing things that are at the heart of the crisis--people can see.

00:15:06 ROMANO: When you were offered this job in this economy, did you realize that there could be a risk that you would be blamed for--


ROMANO: You did? You did?


ROMANO: Talk a little bit about that.

GEITHNER: Again, I've lived--I've been living--I've been living in this world for a long period of time.

You know, these things are very hard. They're complicated proble People disagree on what the right solutions are. Somebody has to make a judgment about what the path we're going to pursue is.

It will--you know, it's hard, and it's hard for people to understand why to fix a recession, you need to put resources into parts of this system that bear most of the blame for the crisis. That's a deeply unfair, difficult thing for people to understand, but there is no path to recovery that doesn't require--depend on a--making sure banks are lending again, there's credit to the economy, and that's a hard thing.

So the politics of financial crises are incredibly challenging, incredibly difficult.

ROMANO: But is it still hard personally to know that you get blamed for a lot of stuff?

GEITHNER: It--it is hard. The hardest thing, though, is just being away from my family --and the toll that--that it takes on them. That's--that's really the hardest thing.

ROMANO: Are you going to move them here at some point?

GEITHNER: They're--they're moving in the--I don't get to move them anywhere, but they're going to move themselves. They're going to move. They're going to come to Washington.

ROMANO: You have no time to help them move.


GEITHNER: No, not only that, I mean, you know, they have to--You know, it's their life, but they're going to come to Washington in the--in August.

ROMANO: How old are the kids?

GEITHNER: I have a daughter who is a senior in high school, a son who's a freshman in high school. She's going to go to college.

He's going to come and go to public school here.

ROMANO: You were selected by People Magazine as one of "Barack's beauties." So is that a compliment to you?

00:16:40 SECRETARY GEITHNER: It's not a good thing for the Secretary of the Treasury to be on the list like that. It's not--not a good thing.


ROMANO: Well, I mean, you know--you know you're like a little bit of a rock star. I mean, you might have, like, some critics over here, but at the White House Correspondents Dinner, there were so many people saying, "Is he here yet? Is he here yet?" I mean, do--do you get a lot of that? Do you--do you hear that or just the criticism? Do you get the rock star status stuff?

GEITHNER: You know, what I spend all my time doing is trying to figure out how we're going to fix this economy, get it back on track, make sure the President's got the best ideas, best suggestions possible, and I feel really privileged to be in the shop working for him at this time. You know, he's just an extraordinary leader, and he's got a great group of people around him, and that's what I spend my time worrying about.

ROMANO: You're going to China on May 30th.


ROMANO: And you were a Chinese studies major at Dartmouth?



GEITHNER: I studied government -and Asian studies.

ROMANO: So how did you become a Chinese studies major?

GEITHNER: Well, I grew up really around the world.

GEITHNER: My father worked for the AID and the Ford Foundation. I lived in East Africa, India, and Thailand, and when I went to college, I was--my first day, I was walking to register for class, and I heard this--this guy swearing in Thai.

ROMANO: And you understood it?

GEITHNER: Look, I lived [ph.] in a Thailand high school.

ROMANO: Mm-hmm. Okay.

GEITHNER: So you learn a little bit of Thai.

And I went up to him, and--and he was a Chinese teacher. He talked me into--

ROMANO: Mm-hmm.

GEITHNER: --taking Chinese. So I did study--I kind of studied Chinese and Japanese for quite a long time. I studied in China, lived in Japan later.

ROMANO: So, what, you're fluent in all these languages or--


ROMANO: No. Some?

SECRETARY GEITHNER: I did teach Chinese. I helped teach Chinese for three years, four years.

ROMANO: Oh. So Mandarin?

GEITHNER: Mandarin, yeah.

ROMANO: Okay. And I understand your father worked with Barack Obama's mother at the Ford Foundation?

GEITHNER: Yeah. When--well, I didn't know this, nor did the President know it, but it turns out that when he was at the Ford Foundation, one of the programs he oversaw was the program the President's mother participated in.

ROMANO: So how did he figure that out that she was there? How did you all put that together?

GEITHNER: Well, I actually remember when I first read his first book, remembering that he was in Indonesia because of--because of his mother, and she was working with the Ford Foundation then, but then I sort of forgot about it, and we didn't talk about it. The President and I didn't talk about it until January, I think.

ROMANO: And did they ever meet?


ROMANO: No. The--your father--

GEITHNER: You know, I'm--

ROMANO: Is it your father or your grandfather?

GEITHNER: It's my father.

ROMANO: Your father and--

GEITHNER: I--I think they did.

ROMANO: --Barack's mother?

GEITHNER: I think they did, but I'm--

ROMANO: Mm-hmm.

GEITHNER: --not sure.

ROMANO: And your grandfather was an advisor to President Eisenhower?


ROMANO: And would--did you grow up in a Republican household?

GEITHNER: My grandfather was sort of interesting politically, but I would not say I grew up in a Republican household, no.


GEITHNER: I grew up in a somewhat political household but not--not Republican.

ROMANO: Was it a Democratic household then?

GEITHNER: Well, I had an uncle who served in a variety of Republican administrations---Jonathan Moore--

But, you know, I--I--partly because I grew up--mostly because I grew up overseas and I saw how the world viewed America, the effect America had on the world, I decided early in life, I wanted to work in public service, work in policy, help shape what this country did.

ROMANO: So you had--you had sort of a global view as does the President.

Do you remember the first time you met the President?

GEITHNER: Yes. I first met him in the fall, before the election, but, like many Americans, I met him first by reading his book.

ROMANO: What were the circumstances of you meeting him?


ROMANO: Over the job?

GEITHNER: Well, we met to have a conversation about what's happening in the world---and the financial system. At that time, I--you know, I was running the New York Fed at that point.

ROMANO: This was before the election?


ROMANO: And did you think you were in an audition at that point?

GEITHNER: You know, we did talk about--you know, we talked about the world. We talked about me a little bit. We talked about Washington at that point.

ROMANO: How many hours a day do you work?

GEITHNER: I work a lot of hours--just about enough.


ROMANO: So how many is that? Do you get a chance to relax? Do you work out? What do you do in your spare time?

GEITHNER: I exercise.

ROMANO: What do you do?

GEITHNER: I read, and I work.

ROMANO: What--where do you exercise? I mean, do any serious exercising or...

GEITHNER: I do quite serious exercising.

ROMANO: Like what? Is there something in the building here?

GEITHNER: There's a gym.

ROMANO: You look healthy is why I'm asking.

GEITHNER: I run. I run.



GEITHNER: I play any sport---any sport I can, as much as I can and I--usually, I bike and swim too.

ROMANO: What--what sports do you play?

GEITHNER: I play tennis. I play basketball.

ROMANO: Did you--have you played basketball with the President?

GEITHNER: No. The President's really good at basketball. Actually, he--he says he's good. I'm not sure actually how good he is, but, yeah, I think he's--he's a better basketball player than I am.

ROMANO: So what--what kind of advice have you gotten from your friends or family or support, you know, to deal with all the pressure and all the criticism and--that you're getting?

GEITHNER: Well, they just say the right thing, which is to stay focused on doing what you believe in, and that's the only thing you can do is to make sure you're doing the best job you can, trying to sort through what are just always bad options.

There's no good options in this area, and just make sure you're thinking through the best choices, make sure the President has got the best advice you can.

ROMANO: Do you read the news stories about yourself?

GEITHNER: I--I generally don't read about myself in the papers. If people tell me I have to read something, I'll read it

ROMANO: And is that basically to keep sane?

GEITHNER: Just a good strategy. It really is a good strategy. If you--if you focus on the perceptions, you won't get the policy right.

ROMANO: Okay, great. Thank you so much for joining us.

GEITHNER: Good to meet you. Thank you.


View all comments that have been posted about this article.

© 2009 Washingtonpost.Newsweek Interactive