'Meet the Press' transcript for March 29, 2009

SEC'Y GEITHNER:  David, the investor's money is at risk.  They can lose all their money.  Now, again, you have to compare these to the alternatives.  In the alternative scheme the government, in our view, would be taking on much more risk.  The taxpayer will be much more exposed to losses.  Life's about choices.  Life's about alternatives.  This is a better way to help get these markets working again.

But let me just step back for one sec.  What we're trying to do is to get the entire financial system, our complicated finances working again so that we get credit where it needs to go in the economy.  And that requires strengthening our banking system.  It requires making sure there is enough capital in the financial system to withstand a deeper recession.  And we're going to make sure that that capital comes with conditions to make sure that banks restructure, that there's accountability for board and management, that the firms emerge stronger, not weaker, and that there are tough conditions to protect the taxpayer.  That is a critical part of what we're going to do.

But our, our system is much more--depends on more than just banks, and so we have to do things to get these markets working again by providing financing directly to those markets that small business, consumers depend on.  And, and, but it's going to require a comprehensive approach.  This particular proposal is not going to solve all our problems, but it is a critical part of the solution and we think it's the best approach to protect the taxpayer and make sure that the market is working with us.

Now, just, just one more thing.  We're not going to get through this unless we get a--willing to take risk again.  You know, the financials took too much risk.  The great danger for us now is they're going to take too little risk, they're not going to take a chance on a viable business or a family that wants to put their kids through college.  So we need to get them working with us in this context.  And of course, for them to take risk they're going to need to have more confidence about what the rules of the game are going forward, that there's clarity about conditions and they don't face the risk of great uncertainty about those conditions going forward.

MR. GREGORY:  And to that point, are you this morning providing a guarantee to those investors that the rules of the games will not change?  If they make money in these transactions, that Congress won't try to go get their gains and change the rules?

SEC'Y GEITHNER:  We have to do that or they won't come.  And it's a simple proposition.  Again, for these, all these programs to work, all these programs to work...

MR. GREGORY:  So the rules of this, of this program won't change?

SEC'Y GEITHNER:  No, they cannot change.

MR. GREGORY:  Will the banks need more money?

SEC'Y GEITHNER:  We have a substantial amount of resources that Congress has authorized.  We're moving forward to use those resources as quickly as we can to get them where they need in the economy.  Just to give you an example, the president's housing program, which was the first major initiative we launched after I laid out that broad framework for financial recovery, has had a big effect working with the Fed and bringing interest rates down to historic lows, making--allowing millions of Americans who were not able to refinance to refinance.  Just to give you a simple example, typical American lives in a house that's worth roughly $180,000.  Refinance in this environment could save up to $2,000 a year.  That's a substantial amount of resource that they can use to spend on things that will help get this economy going again.  Where we are acting, you're seeing progress and impact.

MR. GREGORY:  I want to turn to the issue of anger on Wall Street and those AIG bonuses.  The president said a couple of weeks ago this:

(Videotape, March 18, 2009)

PRES. OBAMA:  I don't want to quell anger.  I think people are right to be angry.  I'm angry.

(End videotape)

MR. GREGORY:  You shared--you said in a letter, you shared the president's outrage, and yet the reality is that these bonuses first came to light back in October of 2008.  You were still at the New York Fed.  They were also the subject of hundreds of e-mails between Treasury and the Fed and AIG during the transition and when you came into office.  In fact, the Treasury Department even negotiated with Senator Dodd with regard to executive compensation when the Treasury Department said, "No, no, don't have this deal with retroactive bonuses.  We can't abrogate those contracts." So if you were so outraged about all of this, why didn't you deal with this back when these first came up?

SEC'Y GEITHNER:  David, how could people not be angry with this?  With the challenges we're facing now as a country in part because of risks our financial sector took on, how could people not be angry?  But our obligation and our deep obligation responsibility is, again, to try to fix this problem so that the trauma in the financial system is not causing more damage to the lives and fortunes of Americans and businesses across the country.  That's the most important thing we do.  Everything we do has to be judged by the test of whether we're getting the economy going again and recover...

MR. GREGORY:  Well, and that's all fair.  But if you were so outraged, why didn't you say that then?  Instead, you said, "I was outraged and we should try to get this money back." The government knew about these bonuses several months ago.

SEC'Y GEITHNER:  Look, we had no good choices in that context, David.  These were contracts written before the government got involved, before Ed Liddy became CEO of AIG.

MR. GREGORY:  Mm-hmm.

SEC'Y GEITHNER:  We're a nation of laws.  We cannot get the economy going again if there's an expectation the government's going to come in and break contracts.  Just not a tenable thing to do.  But what we did is--and we had no good choices, David--was when, when I was informed about the details of those provisions, we moved very quickly to ask that they--those that could be renegotiated get renegotiated, the government get those--or reduce those payments going forward.  And we're going to use the authority we have to go recoup those payments where we have a good legal basis for doing that.  And you've already--we're seeing a lot of those payments returned.  But the important thing is going forward that we establish clear conditions, clear rules of the game, prevent this kind of compensation practice in the future from coming back and putting our system at risk.  And we want to make sure that where the government is putting up assistance for these, for these banks, that that assistance is going to get lending going again...

MR. GREGORY:  Right.

SEC'Y GEITHNER:  ...not to enrich the people that helped get us in this mess.

MR. GREGORY:  But, but my question is, is this:  If you thought this was so outrageous at the time, why didn't you put this on the agenda then?  And if you felt that you didn't have any good choices, that you really couldn't dissolve those contracts, then when it came to light, why didn't you and the president stand up and say, "This populist anger is understandable, but you have to understand it has to be put in context and it has to stop"?

SEC'Y GEITHNER:  Well, that--but that's what the president did say.  And again, we're trying to make sure that people understand...

MR. GREGORY:  The president said, "We shouldn't govern in anger," and then he said, "Yes, I'm angry, too.  I don't want to quell the anger." You said this was outrageous.

SEC'Y GEITHNER:  But...

MR. GREGORY:  Did anybody stand up and say, "Let's put this in context.  We didn't have good choices.  This is not worth getting so upset about"?

SEC'Y GEITHNER:  But, but, as you've seen the president say over the course of the week, the most important thing is we recognize that of course we don't want to reward failure and we don't want the government assistance going to reward failure, but we need to make sure we get this economy on--back on track.  That's going to require the financial system getting fixed and repaired.  Of course we're going to put strong conditions on the compensation...(unintelligible).  Remember, the first--the second week in office, the president put out very, very broad, ambitious standards on compensation practice.  That was before the Congress acted.  He was a--took early initiative in this area because we knew this was going to be a significant problem.

MR. GREGORY:  Let me turn to the issue of staffing at the Treasury Department. The president nominated you back on November 24th.  He understood the priority of having a Treasury secretary in place to deal with this recession.  And yet here we are at this date in March, and if you go to your own Web site on treasury.gov, the only confirmed Treasury official is you, the secretary of the Treasury.  The Economist writes this in its issue this week:  "Filling senior department jobs is always a torturous business in America, but Mr. Obama has made it harder by insisting on a level of scrutiny far beyond anything previously attempted.  Getting the Treasury team in place ought to have been his first priority." I know there were some new nominations just this weekend.  Has it been a priority?

SEC'Y GEITHNER:  Absolutely, David.  And, and we've had some terrifically talented, dedicated public servants working at the Treasury from day one.  And look at what we've done in this period of time.  I mean, you have seen this government do more in eight weeks most governments do in years.  We're moving much more aggressively, much more pre-emptively.  Look at the scale of programs we enacted and look at the impact they're having.  You have not seen this scale of action before in this country or many countries.  And even this week we laid out a set of broad, comprehensive reforms to help make sure that our financial system never goes through this kind of crisis again.  We're moving very quickly.  We've got some very strong, talented people.

MR. GREGORY:  Right.

SEC'Y GEITHNER:  We announced some new appointees this week.

MR. GREGORY:  But in terms of confirmed people in the Treasury Department, what's gone wrong?  Is it the vetting standards?  Is it that you don't want to work with people from Wall Street?

SEC'Y GEITHNER:  Confirmation process always takes time.  It always takes time.  People, people forget when you look back at transitions how long it takes to get people in office.  But we've got no choice but to act.  And again, we've been doing a huge amount of important, productive, consequential programs in a short period of time because we've got terrific people there working with me for the president to help get this economy back on track.

MR. GREGORY:  Do you want people with expertise on Wall Street to come work for you?

SEC'Y GEITHNER:  We need people who have experience in policy, in markets, in banking, in supervision, and we're going to get terrifically talented people to come work for the country.  Because again, I think Americans know we're at a moment of crisis and opportunity, and, and if you...

MR. GREGORY:  So Wall Street people don't have a taint in your book?

SEC'Y GEITHNER:  No.  We're, we're going to make sure we take people--we get people with experience, as I said, in markets and in banking.

MR. GREGORY:  Mm-hmm.

SEC'Y GEITHNER:  Not just in policy.  Because that's what's going, that's what it's going to take.  You know, we're trying to protect the interest of the taxpayer.  That requires people that have knowledge and expertise.

MR. GREGORY:  A couple of more moments here.  I want you to take a moment to explain the government regulation that you are proposing, which is very aggressive going forward.  How would this work?

SEC'Y GEITHNER:  Core thing is to make sure that the institutions at the center of our financial system are subject to much more conservative, much tougher requirements on capital and leverage that are applied more evenly and more effectively, frankly.  We need to make sure that hedge funds and derivatives come within a framework of oversight so we protect the system from the risks they may present.  And we need to make sure the government has the authority it needs to come in more quickly, to help contain the damage, restructure the system, so we can have a stronger system going forward.

MR. GREGORY:  But is the government really capable of moving in on companies that may need it?  Does the government have the level of expertise to unwind something like AIG's financial products division?  You're having your own problems even staffing up the Treasury Department.  Isn't that a lot to, to ask the American people to support?

SEC'Y GEITHNER:  But, but there's no choice.  I mean, how--what would you, what would you prefer, that we live with the kind of choices we saw in Lehman, AIG?  Catastrophic damage, or the government putting huge amounts of taxpayer dollars at risk to help and contain that damage?  We need a better model. What we're proposing to do is use a model that exists for small banks that was designed by the Congress in the wake of the S&L crisis, build on that model and give the government a capacity to act more quickly, more effectively to contain the damage at least risk to the taxpayer and the economy as a whole.

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