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Geither talks stress test and more

Friday, May 23, 2014 - 02:27

May 23 - Former Treasury Secretary Timothy Geithner talks about how the governments efforts during the financial crisis avoided a repeat of the Great Depression. Bobbi Rebell reports.

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Former Treasury Secretary Timothy Geithner sat down with Reuters Editor at Large Sir Harry Evans- to talk about his new book "Stress Test" and the impact of the financial crisis. SOUNDBITE: TIMOTHY GEITHNER, PRESIDENT, WARBURG PINCUS AND FORMER TREASURY SECRETARY (ENGLISH) SAYING: "The best measure of the efficacy of what we did is to compare the fact that we had an economy falling off a cliff, with a Great Depression type risk around the world, and we got the economy growing again in six months. And if you compare the strategy we adopted, it was pretty much the opposite of what was done in the Great Depression, and this was a crisis caused by a shock that was five times larger than what started the Great Depression." Geithner talked about the government's efforts to help during the housing crisis: SOUNDBITE: TIMOTHY GEITHNER, PRESIDENT, WARBURG PINCUS AND FORMER TREASURY SECRETARY, (ENGLISH) SAYING: "Although disappointing and frustrating, and I would say late, slow, we did find a way to help millions of Americans stay in their homes, millions and millions refinanced, even those people who were under water to take advantage of lower rates. And when the President came here to take office, house prices had fallen by about 30 percent and the futures market said they were going to fall another 20, 25%. And we were able to put a floor under house prices and keep the mortgage market open because of the role the government played in a way that was very helpful in getting growth back in that context, even though those efforts were wildly inadequate against the scale of the problem." He also talked about the health of the banking system today: SOUNDBITE: TIMOTHY GEITHNER, PRESIDENT, WARBURG PINCUS AND FORMER TREASURY SECRETARY, (ENGLISH) SAYING: "Capital requirements, which is the measure of capital against risk, is dramatically more conservative today. Probably three times more conservative than it was before the crisis, and it's applied much more broadly not to this tiny fraction of the system like it was in 2007. And in some way as more important than that, as important as that, this regime of stress testing that the Fed designed in the crisis, is basically the constraint on capital and risk across the system. And what does that mean? That means you have to able demonstrate as a bank, you can absorb losses like severe losses and still be able to operate without government assistance. And so it's a much more conservative regime today." He added that the U.S. economy would have benefitted from longer and more powerful stimulus in the aftermath of economic crisis.

Geither talks stress test and more

Friday, May 23, 2014 - 02:27

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