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The comment might seem startling given his emphasis repeatedly on the need to pull back the nation's deficit once the economy is less "fragile" than it now is. But as Geithner spoke with the Chicago Tribune's editorial board Friday, he said "I am deeply at peace with the necessity of what has been done" _ including the government's intervention in GM, investment banks, AIG and Fannie Mae and Freddie Mac. He emphasized that the money is getting repaid.
By showing a willingness to devote "overwhelming force" he says the government was able to break the panic threatening the system in the aftermath of the Lehman Brothers collapse.
"I felt that after the TARP was passed we'd broken the back of the panic," he said.
Still, Geithner notes that while there are "encouraging" signs in recent economic statistics, "unemployment probably will rise further." Although some analysts worry that the nation could be going through a "jobless recovery," Geithner says the recovery so far seems to be following a typical path.
Yet, in answer to a question about rethinking tax policy, he said the economy remains too uncertain to "think about what shape restraint will take." Likewise, while applauding improvements in credit availability and securitization through backing of mortgage-backed securities and small business loans, he acknowledged that without the government's hand the credit crunch would be worse than it is. He says it's too early for the government to withdraw support.
"We are in a classic credit crunch," he said, and that, plus uncertainty about economic growth and proposed health care and energy legislation, have caused some reluctance for businesses to spend.
Although some market watchers believe that commodity prices have escalated too quickly and could provide inflationary pressure on the economy, Geithner said he sees those prices as "an encouraging sign."
He thinks prices have moved up as "the risk of acute deflation has been taken out of the system. People are pricing in future growth."
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(c) 2009, Chicago Tribune.
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