Geithner on the Record: Toxic Assets

Geithner on the Record: Toxic Assets


you that don’t know, where the U.K. government hosted the last meeting of G7 finance ministers and central bank governors. Am I right, that’s what you’re referring to? Okay.

Well, as I said, I think you saw very broad-based support around the table in that room among the world’s major economies. Those people — countries in the room represent I think roughly 85 percent of GDP across the globe. You saw very broad support for the basic strategy that you need to have strong, sustained, macroeconomic stimulus; aggressive efforts to help recapitalize, strengthen financial systems; very substantial support for the international financial institutions so that they can — they can help counteract, respond to this big withdrawal of capital flows from emerging market economies. We want them to be able to deploy a larger amount of resources more quickly in targeted ways to help affect the countries — to help the countries most affected by the crisis, all in a framework where we’re all committing to avoid protectionist measures and reaffirm our commitment to openness to trade and investment.

And alongside that, of course, we want to shape a strong consensus on reform of the architecture of the financial system to help make sure a crisis like this doesn’t happen again. And there is very broad support, very broad consensus, across those countries — countries with very diverse conditions, very diverse financial systems — on the core elements of a very ambitious set of financial reforms.

So, as I said after that meeting, I think there is a very broad-based consensus, very strong support about those — about that basic strategy. And I think you see the world really moving with us on this, and I think that will continue, because I think there’s broad appreciation across the — across the world as a whole about the scale of the challenges this crisis presents.

Q Are you saying there is support, there is agreement around American program, that there are no disagreements, the reports about disagreements were incorrect?

SECRETARY GEITHNER: Well, there are — you know, we all have slightly different financial systems, so the precise mix of tools that we’re going to employ domestically will differ. In our system, as I said, you know, banks are a critical role of our system, but we have a very complicated capital market that complements our banking system, and so to get our system through this, we’re going to have to do things that other countries don’t need to do.

But if you look at the core elements of the program, they all involve a mix of guarantees, funding assurances, capital from the government so you’re recapitalizing parts of the system that need to be recapitalized, and where it’s necessary, targeted programs. You’re seeing many countries follow the lead of the United States in this context — in the U.K., in Japan, and even other countries — to provide direct supports for the credit markets as a complement for interventions in the banking system.

So in the precise mix of plans countries will adopt, will vary, of course,


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