Geithner: No monetary-system changes this decade
WASHINGTON (MarketWatch) — Treasury Secretary Timothy Geithner said Wednesday he doesn’t think there is any realistic prospect of truly dramatic changes to the global monetary system in the next decade or two.
Speaking at a mutual-fund forum, Geithner responded to a question about discussions among China, Brazil and Russia to create an alternative to the dollar.
“Over the longer term, as these economies get stronger and if they really open up their financial system, that they dismantle controls on capital movement, then it is possible that over a longer period of time we’ll see a more significant shift,” Geithner told mutual-fund managers at the Investment Company Institute’s annual Washington forum.
Geithner said the key point was for the U.S. to keep the trust of investors in U.S. dollars.
“The important thing is that ultimately what matters most is our capacity to earn the confidence in the world that this is a good place to invest your resources. That requires, particularly because of damage caused by crisis, that we work very hard to earn trust,” he said.
Deficit debate
In addition to currency issues, Geithner talked about efforts underway between the Obama administration and House Republicans over how to reduce the U.S. deficit.
He argued that reducing the deficit is critical to making sure the U.S. can invest in key objectives critical for future economic growth, such as education and infrastructure.
“It’s the right and necessary time to build a necessary consensus on fiscal reforms ... [and] get our debt on a path where it’s falling as it should be,” Geithner said. “We have to demonstrate that we can live within our means. That’s not something we can delay and put off.”
Geithner declined to comment on which companies would fall under a newly formed Financial Stability Oversight Council. Such companies would be subject to new heightened capital requirements, and the matter has captured the attention of a number of powerful Washington interest groups.
Geithner said that the goal of the effort is to make sure the system has institutions that play the same kind of role — and whose failure would cause significant damage to the economy — to be regulated the same way, with higher restrictions on leverage.
“If you look at how did we get into this mess, a central vulnerability is that we ran a system where we left a large parallel system in place with a diversity of institutions that were engaged in the business of banking without any constraints on leverage,” he said.
“A central imperative in financial reform is to not just to get those shock absorbers thicker, more conservative, but to make sure we can apply those to institutions engaging in fundamentally similar activities,” he said.
Geithner also declined to comment on efforts under way at the stability council, which he chairs, to ensure that money-market funds bail themselves out in the event of another financial crisis.
Regulators and industry participants have focused on money-market funds since one of the largest, the Reserve Primary Fund, suffered a run on assets due to losses connected with the Lehman Brothers failure in September 2008.
The industry and regulators are seeking a permanent fix, and are considering several proposals including one that would create a central pool of money that could be used as a last resort in a crisis.
Geithner pointed to Securities and Exchange Commission Chairman Mary Schapiro as the point person on this effort. Schapiro is also a member of the stability council.
“Schapiro and her colleagues are doing a thoughtful job seeking to bring more resilience into that system without depriving the economy of the broader benefits that those funds provide,” he said.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
http://www.marketwatch.com/story/geithne....=MW_latest_news
WASHINGTON (MarketWatch) — Treasury Secretary Timothy Geithner said Wednesday he doesn’t think there is any realistic prospect of truly dramatic changes to the global monetary system in the next decade or two.
Speaking at a mutual-fund forum, Geithner responded to a question about discussions among China, Brazil and Russia to create an alternative to the dollar.
“Over the longer term, as these economies get stronger and if they really open up their financial system, that they dismantle controls on capital movement, then it is possible that over a longer period of time we’ll see a more significant shift,” Geithner told mutual-fund managers at the Investment Company Institute’s annual Washington forum.
Geithner said the key point was for the U.S. to keep the trust of investors in U.S. dollars.
“The important thing is that ultimately what matters most is our capacity to earn the confidence in the world that this is a good place to invest your resources. That requires, particularly because of damage caused by crisis, that we work very hard to earn trust,” he said.
Deficit debate
In addition to currency issues, Geithner talked about efforts underway between the Obama administration and House Republicans over how to reduce the U.S. deficit.
He argued that reducing the deficit is critical to making sure the U.S. can invest in key objectives critical for future economic growth, such as education and infrastructure.
“It’s the right and necessary time to build a necessary consensus on fiscal reforms ... [and] get our debt on a path where it’s falling as it should be,” Geithner said. “We have to demonstrate that we can live within our means. That’s not something we can delay and put off.”
Geithner declined to comment on which companies would fall under a newly formed Financial Stability Oversight Council. Such companies would be subject to new heightened capital requirements, and the matter has captured the attention of a number of powerful Washington interest groups.
Geithner said that the goal of the effort is to make sure the system has institutions that play the same kind of role — and whose failure would cause significant damage to the economy — to be regulated the same way, with higher restrictions on leverage.
“If you look at how did we get into this mess, a central vulnerability is that we ran a system where we left a large parallel system in place with a diversity of institutions that were engaged in the business of banking without any constraints on leverage,” he said.
“A central imperative in financial reform is to not just to get those shock absorbers thicker, more conservative, but to make sure we can apply those to institutions engaging in fundamentally similar activities,” he said.
Geithner also declined to comment on efforts under way at the stability council, which he chairs, to ensure that money-market funds bail themselves out in the event of another financial crisis.
Regulators and industry participants have focused on money-market funds since one of the largest, the Reserve Primary Fund, suffered a run on assets due to losses connected with the Lehman Brothers failure in September 2008.
The industry and regulators are seeking a permanent fix, and are considering several proposals including one that would create a central pool of money that could be used as a last resort in a crisis.
Geithner pointed to Securities and Exchange Commission Chairman Mary Schapiro as the point person on this effort. Schapiro is also a member of the stability council.
“Schapiro and her colleagues are doing a thoughtful job seeking to bring more resilience into that system without depriving the economy of the broader benefits that those funds provide,” he said.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
http://www.marketwatch.com/story/geithne....=MW_latest_news