Obama says would not accept Geithner resignation

WASHINGTON Sun Mar 22, 2009 12:21pm EDT

CBS correspondent Steve Kroft (L) interviews President Barack Obama in the White House March 20, 2009 for the March 22 airing of 60 Minutes. REUTERS/Aaron Tomlinson-CBS News/60 Minutes/Handout

CBS correspondent Steve Kroft (L) interviews President Barack Obama in the White House March 20, 2009 for the March 22 airing of 60 Minutes.

Credit: Reuters/Aaron Tomlinson-CBS News/60 Minutes/Handout

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WASHINGTON (Reuters) - President Barack Obama on Saturday stepped up his weeklong defense of much-criticized Treasury Secretary Timothy Geithner, saying he would not accept his resignation even if it was tendered.

It came ahead of a critical week for Geithner, who is expected to unveil his much-anticipated bank bailout plan and flesh out the administration's proposals for financial regulatory reform when he appears before the House of Representatives Financial Services Committee.

Obama said in an interview with CBS television network's "60 Minutes" program that if Geithner tried to quit, he would tell him, "Sorry buddy, you've still got the job."

Geithner has been under fire over his failure to block at least $165 million, and possibly as much as $218 million, in bonuses paid out to employees of insurer American International Group, which has received billions in government aid.

With public outrage over the AIG bonus scandal mounting and several lawmakers calling for Geithner's resignation, Obama was forced this week to repeatedly defend his treasury secretary, saying he had his complete confidence.

While Obama has said Geithner's job is safe, some Washington pundits have noted it is not a good sign that the president has had to say it, and so often.

The odds on whether Geithner will leave by the end of June increased over the last week in the Intrade political prediction market, although traders still gave it only a small chance of happening.

Obama stressed in the "60 Minutes" interview, which will be broadcast on Sunday, that neither he nor Geithner had discussed the possibility of his quitting, CBS said in a statement on Saturday.

Geithner said this week he took full responsibility for the controversy surrounding the AIG bonuses and dismissed calls for his resignation, saying it "just comes with the job."

Geithner, who has been in his job less than two months, has also faced criticism over his slow roll-out of plans to save the banking sector, which Obama said this week was key to staving off further financial calamity.

TOXIC ASSETS

A source familiar with the bank bailout plan told Reuters on Saturday the Treasury Department would unveil a program next week aimed at cleansing toxic assets from bank balance sheets that have frozen up lending and fueled the recession.

The keenly awaited plan proposes setting up an entity the Federal Deposit Insurance Corp will use to offer low-interest loans to private interests for buying up banks' soured assets, many of which are tied to mortgages and have tumbled in value.

The Treasury Department will also hire outside investment managers to run public-private partnerships that could invest for potential profit in troubled mortgages, with government capital matching private capital contributions.

The New York Times said Treasury would also unveil a sweeping plan next week to overhaul financial regulations that would call for increased oversight of executive pay.

However, an administration official said there were no announcements planned for next week and dismissed the idea that executive pay was linked to regulatory reform.

"Working with Congress, in the coming weeks we'll unveil financial regulatory reform to make our system stronger and smart, and to ensure we never find ourselves in a situation like this again," the official said.

"This week the administration will continue to address the systemic risk built into our regulatory structure, including updating regulations and establishing new resolution authority to deal with companies that pose risks to our broader financial system," the official said.

Trying to refocus attention from the AIG bonus scandal, Obama vowed on Saturday to stick to the big-ticket items in his record $3.5 trillion budget proposal for 2010 but acknowledged that dollar amounts would "undoubtedly change" as Congress prepared to take up his record spending plan.

"It's an economic blueprint for our future, a vision of America where growth is not based on real estate bubbles or over-leveraged banks, but on a firm foundation of investments in energy, education and health care that will lead to a real and lasting prosperity," he said in his weekly radio address.

The budget committees of the Senate and House of Representatives were set to begin crafting their budget legislation next week.

(Additional reporting by Karey Wutkowsi and Matt Spetalnick)

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