Outgoing US Secretary of the Treasury Timothy Geithner thinks the US economy will strengthen this year — as long as US Congress avoids cutting spending too deeply in a budget deal and Europe’s economy gradually improves.
In an interview on Friday — his last day in office — Geithner said: “The economy is stronger than people appreciate.”
He said he agrees with many private forecasters that growth will accelerate this year, in part because the US economy is no longer being held back by oil shocks and Europe’s debt crisis has subsided.
Asked about his future, Geithner ruled out the possibility that he would return to Washington as chairman of the US Federal Reserve next year, when US Federal Reserve Chairman Ben Bernanke’s term ends, if asked by US President Barack Obama.
Obama last week nominated Jack Lew, his chief of staff and former White House budget director, to succeed Geithner as Treasury secretary. Lew’s nomination is expected to win approval in the US Senate.
Geithner was the last original economic adviser to Obama.
In a wide-ranging interview, Geithner made several other points:
He said the move by US House of Representatives leaders to postpone a deadline for raising the debt ceiling for nearly four months is encouraging, but must be followed by action to remove the threat of a first-ever US default from budget talks.
He also said that a permanent solution for beleaguered mortgage giants Fannie Mae and Freddie Mac, which the government took over in 2008, might not be achieved before Obama leaves office. Geithner said it could take between three and five years to reduce the dominant role the two companies play in mortgage financing enough so that their role can be handled by a new enterprise.
Geithner added that the Dodd-Frank Act, the sweeping financial overhaul Congress passed in 2010, will not be overturned, even though Republicans and many in the financial services industry want to weaken or kill it.
Lastly, he defended the actions he helped take to bail out large banks and stabilize the US’ financial system.
“It is very hard to convince people or make credible to people the risks that we were living with at that time. That we could have had a much deeper collapse of not just the US economy, but the global economy,” Geithner said.