WASHINGTON The following are highlights from a congressional Joint Economic Committee hearing on Thursday on financial reform with U.S. Treasury Secretary Timothy Geithner.
GEITHNER ON FINANCIAL TRANSACTIONS TAX:
"I have not seen a version of that kind of tax that I think would be appropriate for our country. In designing the future rules of the game for this financial system going forward ... if the taxpayer is ever exposed to the risk of loss in the future, then that risk should be covered by a fee on the financial industry. That is a basic fair principle of justice. And it is a necessary essential thing."
GEITHNER ON BAILING OUT AIG:
"AIG presented exactly the same kind of risk Lehman did, but in some ways they were greater, because AIG as an insurance company, one of the largest in the world, was providing a range of insurance products to households across the country. And if AIG had defaulted you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world..."
"The United States of America, largest financial system in the world, dollar the reserve asset of the entire financial system, came into this crisis without anything like the basic tools countries need to contain financial panics and manage failure. Coming into AIG, we had basically duct tape and string."
GEITHNER ON WHY AIG COUNTERPARTIES WERE PAID IN FULL:
"The clearest way to say it is that, this institution, made tens of thousands of contractual commitments. If you default on those commitments then you end up defaulting on all commitments."
GEITHNER ON REGULATORY COUNCIL:
"We need to put in place a council (of regulators) for coordination, a council that's charged with making sure we have a level playing field with strong standards. But we can't have supervision enforcement, or rule-writing by council or committee. The American people and the Congress should know who's responsible."
GEITHNER ON NEED FOR REGULATORY OVERHAUL:
"Unfortunately, the regulatory regime that failed so terribly leading up to the financial crisis is precisely the regulatory regime we have today. That is why recovery alone is not enough. To ensure the vitality, the strength and the stability of our economy going forward, we must bring our system of financial regulation into the twenty-first century. We need comprehensive financial reform."
GEITHNER ON ECONOMIC OUTLOOK:
We expect continued growth in the fourth quarter and ahead in 2010. But as we press forward toward recovery, there is still much work to do not only to ensure that many more Americans see the tangible benefits of recovery, but also to help ensure that Americans are never again forced to suffer the consequences of a preventable economic collapse.