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Don't pull rescue cash too soon, says Geithner

Published 16/10/2009

Treasury secretary Timothy Geithner said the recovery of the US economy could be derailed if the government's support systems were removed too quickly.

"A classic pattern in past financial crises is governments tend to put on the brakes too soon, withdraw support too early, and that's been a very costly mistake and we're going to be very careful to avoid that mistake," Mr Geithner said at a conference sponsored by The Economist magazine in New York.

Mr Geithner said a robust recovery depended on businesses investing more in the economy and that it was the government's responsibility to give them the tools to do that.

He said he was seeing signs of improvement, but stressed that the recovery would be slow.

"We've improved the prospects that we're not going to be consigned to a prolonged period of below-trend growth," he said.

But he said there would be a long period of adjustment as consumers saved more and businesses worked to improve their balance sheets.

"Realistically, it's going to be a slower than typical recovery," he said.

Mr Geithner's comments come as the debate heats up over when the US government should remove its fiscal stimulus programmes and curtail its massive spending, and whether the economy will be strong enough to stand on its own once it does.

"Businesses across the country are still uncertain about how strong demand is going to be," he said.

"If you don't make people confident that you're going to allow recovery to happen and become self sustaining, then the risk is you're going to have weaker recovery."

Part of building confidence would come from the government's success in effectively regulating the financial system and enforcing more transparency among the nation's top banks, he said, defending the efforts to rein in executive compensation practices.

Mr Geithner said it did not make sense for the government to set executive pay levels. Instead, the government was trying to "change the practices, change the incentives" so that excessive risk-taking was not rewarded.

Belfast Telegraph

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