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Geithner on Marketplace

Marketplace host Kai Ryssdal just taped an interview with Treasury Secretary Tim Geithner. The interview airs this evening, but I sat in on the taping and took some notes.

Geithner says the plan announced today is only one part of the solution, but it's clear he believes getting banks to lend more money is a major component of the economic recovery.

But Kai asked him a critical question:

Ryssdal: "Even if you can get the banks lending though, do you think consumers have the appetite? I mean, they're already loaded down with debt, they got other things on their mind than taking on a new mortgage or buying a new car."

Geithner : "You're right that we're coming off a period where people borrowed too much. And lending's gonna have to fall, no matter what. But what we need to do is make sure that the supply of credit available does not fall below the economically viable demand for credit. You know, so you have businesses and families that were careful and prudent. They've got a business they want to expand. Or they've got an education they want to finance or a car or a home they want to borrow. We want to make sure they have that opportunity. And that requires that we repair this financial system."

Okay, again, he's saying that getting banks to lend is in the best interest of the people. But Kai follows up with this question:

Ryssdal: How do you convince those taxpayers? Because you have two constituencies here, right? You have Wall Street, who you have to make believe this plan works. And you've got taxpayers, who you have to convince that this is not just another handout of taxpayer money to private industry. How you do that?

Geithner : We have only one constituency, which is the average working American that's trying to get themselves to the point where they can do what every family wants to do. That's the only constituency we have. And everything we're doing is designed to make sure that we get the economy back on track more quickly so that they suffer less from the consequences of the deeper recession. And that requires, in some cases, that we provide support to banks. But we're not doing it for the banks. We're doing it for the people who depend on banks....

Ryssdal: It won't come as a surprise to you though that a lot of people out there in country probably don't see it that way.

Geithner : And I completely understand that, and their skepticism and concern is perfectly reasonable... I think most Americans understand, most businesses understand in particular that you need a financial system for an economy to work. It's banks that provide credit, which is really the lifeblood and oxygen of the economy.

That's a great point for discussion. Is credit the lifeblood of the economy or should it be? If not, what is? And do you believe that taxpayers are, in fact, the only constituent?

And you can listen to the full interview here:

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It seems like we are seeing a series of over corrections when it comes to lending. It started with leading too much to people who where not responsible enough to turn it away. This was followed by a no credit for no one period as the banks stacked their remaining cash. Finally we are dumping money from helicopters again. I just finished my house refi today...Fixed rate, just waiting to ride the inflation wave. or given the state of the economy, maybe the word is Stagflation.

The lifeblood of our economy is not simply just credit. Credit is just a tool. The lifeblood of our economy is the value of an honest day's work. The dollar income value. It is how we pay off the credit and interest. Like an ecosystem where the bacteria and ameobas break down raw meterials and wastes and turn them into nutrients that make their way up the food chain. You starve out the nutrient producers, and the whole rest of the food chain has to battle over diminishing nutrients.

The problem with our economy is that it has been finding all kinds of creative ways to cut what people earn with an honest day's work, and finding creative ways to take what less they earn. And unlike congress, the people are required to pay their credit bills. There comes a time when more credit can't get people going when you have too much debt and no way to pay it off.

People in the media blame us for stuffing money away in shoe boxes and stalling the economy. That is not the truth. We don't have anything to stuff away in a shoe box.

Like it or not, Wall Street is an integral part of our economy. And perhaps our banking system shouldn't be as powerful as it has been but it needs to be fixed. There are plenty of reasons to complain about any piece of the recovery efforts coming from the Obama administration. But our economy is in very bad condition. I applaud Obama for attacking the situation pragmatically and comprehensively. I hope it all works out. But in the mean time there don't seem to be any credible plans coming from others in our government.

How do I apply for one of these bailouts to pay off my mortgage. It is a toxic asset.

I liked the skydiving analogy used at the top of the show. However, you left out the fact that all of the golden parachutes had been grabbed by the "first class" passengers and flight crew that "bailed out" safely and landed safe and sound without a care about who they left behind. The new Obama/Geithner crew are left behind to help us sew up the remaining parachutes and go two at a time out the door to lighten the load of worthless cargo left behind by the navigators that had a bad flight plan in the first place. I'm just hoping those of us that may still be in the plane without a parachute will have a safe landing. I hope Geithner has taken lessons from Capt. "Sully".

I respectfully disagree with the Secretary. Credit (ability to lend money) isn't necessarily the lifeblood of the economy.

It's the stability of money. The stability of assets. The stability of institutions which manage and trade in both of these commodities. That these banks are failing for having gambled on assets and CDOs and CDS' and what have you ... has made both our money, and our trust in those who stockpile it, a shambles. We need to fix THAT to fix this economy.

Once that's in place, I'm sure those that have money will be willing to lend it. And others will borrow it. For now, who wants to lend money to a bank that's cadging the Guv for billions of dollars every few months just to stay afloat.

I'm not sure that propping thse institutions up is the solution. Some of them need to fail so some phoenix can rise from the ashes. If taking that plunge isn't scary, I don't know what is.

Any theories on what makes them (and others) SO tone deaf? Not to mix metaphors, but there is a major blind spot here. Private jets and mega bonuses have no more place in corporate America. So what am I missing about how they see the world? I'm asking genuinely, not rhetorically. Anybody?

To believe that the era of over-compensated executives and of a growing wealth gap is over is not just naive, it's dangerous. Get ready for a whole new fleecing when the boom times start again.

Yes, they're "doing for the people who depend on banks..." to pay their multimillion dollar salaries (and bonuses) so they can live in all the luxury they so clearly merit. This is really starting to remind me of the way Bush sold his ultra-irresponsible tax cuts for the wealthy as middle class tax relief. Frankly, I expected better from this administration. My only solace is in imagining how much worse McCain's people's proposals would have been.

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