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WASHINGTON, Dec 22 (Reuters) - U.S. Treasury Secretary Timothy Geithner expressed confidence on Tuesday that the U.S. economy was on a solid recovery path, but said tight lending practices by banks still pose a risk.
“Right now, the real risk we face is that banks are not lending enough and not going to provide the capital businesses need to grow for the economy to strengthen going forward,” Geithner said in an interview on National Public Radio.
“The risk is that the pendulum having been too soft and easy on the lending side, the risk is that banks over-correct or that supervisors over-correct and that’s something we need to lean against because the strength of recovery will depend in part on credit being available to businesses,” he added.
Earlier on Tuesday, Geithner joined President Barack Obama at a White House meeting with a group of small bankers chosen from communities across the country to discuss the topic of willingness to lend.
Geithner said the Obama administration was determined to make sure it does not withdraw support from the financial system too early, which he said could potentially lengthen the economic slowdown.
He said the Treasury “will do what is necessary” to prevent another severe downturn. “We cannot afford to let the country live again with a risk that we’re going to have another series of events like we had last year,” Geithner said.
The government pumped hundreds of billions of dollars into big and small banks to prop them up last year, and many of the biggest banks now are paying back the money they received from the Troubled Asset Relief Program, or TARP.
Geithner said banks must earn back the public’s trust.
“I think it’s very important for banks to understand that they lost the basic confidence and trust of the American people and they have a long way to go to earn that back,” he said.
Geithner said he felt economic growth was accelerating during the fourth quarter and cited rising consumer confidence and more consumer spending as positive indicators. (Reporting by Glenn Somerville, Editing by Dan Grebler)