Despite continuing foreclosures, problems in the commercial real estate sector and persistently high unemployment, Treasury Secretary Timothy Geithner expressed a clear confidence late Tuesday that there will not be a "second wave" of the financial crisis.
"We'll do what's necessary to prevent that," he said in an
Geithner's comments were unusually pointed as the Obama administration seeks to build confidence in the budding economic recovery. He pushed banks to take more risks by making more loans, arguing policymakers will focus on financial stability "in the future."
"Right now the real risk we face is that banks are not lending enough and are not going to provide the capital businesses need to grow," he said. "The real risk is the pendulum having been too soft and easy on the lending side. Right now the risk is that banks overcorrect or that supervisors overcorrect and that's something we need to lean against."
He also took the industry to task for not fully understanding the public's anger at banks.
"It's very important for banks to understand they lost the basic confidence and trust of the American people and they have a long way to go to earn that back," he said. "Every judgment they make now going forward in terms of how they pay their employees, how they run their institutions, how they meet the needs of their customers, how much they support this very important effort of reform across the system is going to be important to building that basic trust and confidence."
Geithner, who has been branded as being too close to Wall Street firms, also defended his frequent interactions with big banks.
"I'm the secretary of the Treasury," he said. "I have to spend time figuring out what it's going to take to fix things that are broken in the financial system and that requires spending time with the leaders of the nation's major institutions. There's no way anyone can do this job without doing that."
