Geithner on the Record: Toxic Assets

and letting this process of deleveraging continue to weigh on the American economy, pushing viable businesses closer to the edge, where they have to shrink their businesses to get through this. And that’s not an alternative we’re prepared to support.

The key thing is, again, that you — people have to compete for the right to get access to financing in this context and they have to put money at risk for it to work.

Yes.

Q Can you clarify under both plans who is actually holding the assets at the end of the day, and explain to taxpayers what the upside is to all of that? How are they going to share in the upside of this program?

SECRETARY GEITHNER: These funds — purchase assets — they’re managed by professionals who know how to do this for a living. If there is a return to these over time, which we expect there will be, taxpayers will share in that return. So taxpayers are getting to take the benefits of providing this financing to the market. Now, of course investors will share, too, in that return, as you would expect. That’s the simplest way to describe it I think.

Q Mr. Secretary, can I ask you, how concerned are you that if the AIG bonus tax passes Congress that it will deter private investors from participating because they’ll fear rules can be changed retroactively? And would you advise the President not to sign the legislation, should it come to his desk?

SECRETARY GEITHNER: Let me just repeat what the President said. You know, we’re going to have to work through this and find the right balance.

It is very important that we do things that ensure and raise confidence in the American people that compensation practice are not rewarding failure, that taxpayers’ money is not being used to reward people who should not be rewarded, and that the resources we’re providing are going to benefit the overall economy and the financial system by, again, getting credit flowing again and getting interest rates down.

We need to balance that basic objective that we not reward failure against the hugely important imperative that we get the financial system doing what it needs to do for recovery. And we’ll find that balance. We’ll get that balance. We’ll work with Congress carefully to make sure we get to a point where we have an appropriate balance. I’m very confident that we’ll work through this.

Q And on this specific legislation?

SECRETARY GEITHNER: And on the specific legislation, like on any, we’re going to look carefully at how this works through the Congress and try to make sure that we get this balance right.

Q And your advice to the President?

SECRETARY GEITHNER: I have advice for the President on lots of things, but I’m not going to share that with you now.

Q But just a follow-up on that, are you concerned that the private investor, seeing what’s going on with AIG, with the potential to make very large returns under this program, multiples of the TALF, that there’s

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