Treasury Secretary Timothy Geithner threw a bomb at America’s financial future last night, saying he is “certain” another financial catastrophe is on the way and that there is no way of reaching agreement on the debt ceiling without increasing taxes on the wealthy.
And he blamed a combination of timid politicians and credit card-debt-ridden Americans, rather than Wall Street and the big banks, for the financial woes that have beset the country over the past three years.
Geithner was speaking at a New York screening of the HBO adaptation of Andrew Ross Sorkin’s book “Too Big to Fail.” It came on the day that Sen. Tom Coburn, R-Okla., pulled out of the “Gang of Six” trying to find a bi-partisan solution to the debt ceiling crisis.
Geithner said, “I’m certain we will” experience another crisis but not when or what kind.
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The Treasury Department did not immediately respond to Newsmax’s request for comment on the Secretary’s remarks.
Geithner made his comment on taxes after The Daily Beast’s Lloyd Grove asked him if there was any solution to the debt ceiling crisis that did not involve raising taxes on the wealthy, despite Republicans’ fervent opposition.
“No,” he said, adding, “It might take them some time to come to that realization.”
Geithner said he does not know when the next meltdown will happen, nor what kind it will be, during a question-and-answer session with Sorkin and Pulitzer Prize-winning financial writer Liaquat Ahamed. But he warned it is on its way.
“It will come again. There will be another storm. But it’s not going to come for a while.” When Sorkin tried to press him for details, he added, “You will not know. It’s not going to be possible for people to capture risk with perfect foresight and knowledge.”
Geithner defended the massive TARP program that rescued Wall Street’s financial institutions, comparing its final cost, which he put at “well under $100 billion,” to the savings and loan crisis of the 1980s which ate up “3 percent of GDP.”
But Geithner said TARP was nearly sabotaged by politicians, worried about the reaction of voters. “They thought ‘I can’t do that. They’re going to kill me if I do that, so I’m gonna sit here and wait.’ ”
He said Americans were shocked that it seemed that TARP was rewarding banks for the behavior that nearly brought them down, but, in reality, the average man in the street had to carry much of the blame.
“Americans as a group borrowed a huge amount of debt,” he said. ”There was indiscriminate pushing of credit into the fringes of the spectrum.”
When Sorkin asked him why no banker had gone to jail for their role in the meltdown, Geithner said it’s not over yet.
“That chapter’s not written. Don’t reach premature judgments on that,” but he added, “Taking too much risk and making stupid mistakes may not be a crime.”
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Geithner said the crisis over the debt ceiling was bound to be resolved.
“Ultimately people know they can’t put in doubt the creditworthiness of the United States.”
That view was today backed by Richard Haass, president of the Council on Foreign Relations. On MSNBC’s “Morning Joe,” he said Coburn’s withdrawal from the Gang of Six was bad news for the American economy.
“We don’t even begin to have the pieces in place for a formula to get us through this July or August,” said Haass.
“If this game of chicken continues to be played out before the federal debt ceiling gets lifted, this could be a major shock to the American economy.”
And Florida GOP Congressman Allen West weighed in too. During an exclusive interview with NewsmaxTV he said the two parties have to find common ground. “The future of this nation is at stake,” he said.
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