U.S. must learn to live within its means: Geithner

By Glenn Somerville and Walter Brandimarte

WASHINGTON (Reuters) - The United States must live within its means once its economy recovers if it is to preserve global confidence in the U.S. dollar's status, Treasury Secretary Timothy Geithner said on Friday.

He made the comments after the Obama administration reported a record U.S. budget deficit for the fiscal year ended September of $1.4 trillion, or nearly 11 percent of gross domestic product. That marked the biggest U.S. fiscal shortfall since World War Two.

Rescuing the economy and some of the country's biggest banks from the worst recession since the Great Depression took a toll on U.S. finances, and the White House has forecast deficits of more than $1 trillion through fiscal 2011.

"Future deficits are too high, and the president is committed to working with Congress to bring them down to a sustainable level as the economy recovers," Geithner said in a statement accompanying the fiscal data.

Separately, White House economic adviser Lawrence Summers said financial firms that helped precipitate two years of economic crisis are going to have to bow to stiffer oversight of their activities to prevent it happening again.

FISCAL OUTLOOK AFFECTS US DOLLAR

The U.S. dollar's status as a key reserve currency carry special responsibilities that include keeping spending under control," Geithner said earlier on Friday in an interview on CNBC television.

"It is very important that Americans understand that we need to do everything possible to sustain confidence in our ability to keep inflation low and stable over time and to make sure we're getting our fiscal house in order," Geithner said.

Developments over the past year, when many investors put their money into U.S. Treasury securities and the dollar rose at times, showed there was still a great deal of confidence in U.S. economic management.

"The world wanted to be in Treasuries, in the safest and most liquid markets, and you saw the dollar rose when people were most concerned about the future of the world," he said.

"That is a very important thing. It's not something you can count on. It's something we can understand, and we can continue to foster, and we're going to do that," Geithner added.

The administration has to be careful not to withdraw economic stimulus too fast though, Geithner added. But he denied that the administration was ready to consider a second economic stimulus program.

Geithner said access to credit in the overall economy has improved dramatically but many small businesses that typically create many jobs still face borrowing constraints.

The Obama administration is working on measures to help small businesses get easier access to credit -- possibly by diverting some bank bailout funds to them -- but hasn't yet announced a program to do so.

BANKING NEEDS TO CHANGE