Live-blogging Timothy Geithner

Your humble blogger is listening in to a Q&A with Treasury Secretary Timothy Geithner, courtesy of the Council on Foreign Relations, which has said, "Chatham House Rules be damned" and is allowing bloggers like me to prattle on.  This post will be updated through the next hour.  On to the show!!

9:15 AM:  We’re also allowed to e-mail questions.  I resist the temptation to write, "Just how much do you want to gut-punch Paul Krugman?" and instead submit a question about China.  Let’s see if it gets in the queue! 

9:20:  Roger Altman is moderating, and opens by noting that the Fed has provided an estimated $14 trillion in various of guarantees and injections of capital into the global financial system.  Gulp. 

9:22:  Geithner opens with a shout-out to his old staff at the New Yor Fed.  This is one reason why past staffers like him so much. 

9:23: Quotes former Mexican president Ernesto Zedillo:  "Markets overreact, so policy should overreact."  Says we’ve borowed too much, taken on too much risk, and ordinary Americans are now bearing the cost, which makes it fundamentally unfair.  American people are justifiably pissed (he did not use that word).  Notes that the absence of a serious recession over the past two decades created false expectations of continued prosperity. 

9:24-9:31:  Basically a reprise of his testimony from yesterday. 

9:31:  Now pushing for global coordination of standards at the G-20. 

9:32:  OK, let’s get to the actual Q&A!!

9:37:  Altman asks about the future of the plan if Congress does not authorize any additional TARP funds.  Geithner tap-dances, basically says that they would need to muddle through. 

9:43:  Oh, sweet Jesus, Benjamin Barber is asking a question.  And Timothy Geithner just said he sounded like an economist!!!

Seriously, Barber asks a semi-decent question about whether the bank plan socializes losses and privatizes the benefits.  Why not nationalize? 

Geithner responds by saying that governments, in a time of crisis, have to be prepared to assume risks that private actors cannot absorb — but still have o avoid assuming too much risk.  The complexity and scale of these financial institutions would force the government to assume way too much risk if nationalized. 

9:46:  A lawyer asks whether the Treasury has an estimate of the value of the toxic assets held by the ten largest financial institutions.  Geithner responds :  "If that was a knowable, high enough number, we wouldn’t have a crisis."  Then says that they’re relying on a range of public sector and private sector estimates.  States that the market value of these assets now is probably much less than they might be in a less panicked future. 

9:52:  Geithner is asked about China (not my question) and the IMF’s new proposals for expanded lending.  He responds by praising Zhou Xiaochuan, China’s central bank governor, but claims that he hasn’t read his proposal in detail.  Geithner makes it clear that he is quite open to expanding the IMF’s Special Drawing Rights for less developed countries.  Still, he wants it to evolve and be integrated within the current international monetary system — as opposed to the de novo creation of a new global currency. 

I’ve read the report (Tim, it’s not that long, take a look!) and Zhou is not proposing anything so radical so soon, so this is a bit of a red herring.  Still, Geithner’s statement here carries the same kind of firm pushback that Obama gave yesterday about any move ending the dollar as the global reserve currency.   

Geithner follows up by saying that the future of the dollar in the international system is really a function of long-range U.S. fiscal policies.  Wants to keep U.S. debt-to-GDP ratio stable, and asserts that there is now a consensus in Washington about fiscal rectitude.  This is juuuust a little strange to hear given this year’s fiscal balance sheet.

10:00:  Asked a question about what he expects from the G-20.  Boilerplate response, which is not encouraging.  Wonder if he’s read the Czech PM’s recent statements. 

10:08:  A good follow-up to the G-20 boilerplate, asked about the Scandanavian plan to rescue banks.  Geithner’s response:  "We are not Sweden," though looking at the  Seems his chief concern is that there will be a premature withdrawal of rescue efforts

10:09:  Herb Levin asks the extent to which exchange rates play a role in these decisions.  Geithner:  "Is this a trick question?"  and laughs it off.  A little too much tap-dancing here.

10:10:  Asked if there is a limit to the Fed’s balance sheet, and Treasury’s ability to backstop that balance.  Geithner punts it to Bernanke, then references this joint Treasury/Fed statement. 

10:13:  Asked what headline he wants from the upcoming G-20 summit, and he replies something like "Broad, coordinated action across range of issues by G-20."  And this is why Geithner is not in the newspaper industry. 

10:14:  Last question.  Roger Altman asks Geithner "on behalf of the markets" to clarify his response to the PBoC plan on the future of the dollsar.  Says he continues to see the dollar as the world’s reserve currency for both the short-term and the long-term.  Also stresses the need for macro-fundamentals to be strong enough to ensure that this continues to be the case. 

That’s a wrap!