The United States will ultimately face yet another financial crisis in the future, Former Treasury Secretary Tim Geithner warned Thursday.
However, since the 2008 financial fiasco, the United States has at least taken measures and implemented structural reforms that will minimize any damage,
he told CNBC.
"People thought [in 2008] that we were going to have a Great Depression. People thought we might have hyperinflation. We thought we might turn into Greece," he said. "The American economy is doing relatively well, making steady progress."
He said the US is “still a very tough economy for lots of people. But if you look at the rest of the world, look at how countries view us. They view what we did with a huge amount of admiration and I think even with all of our challenges, we're a lucky country.”
The market changes implemented since the last crisis injected "more capital into the system" and enacted "tougher rules on risk-taking," he said. "They're strong enough, if they're not eroded, to buy this country a relatively long period of financial stability," he said.
"The only way you protect people from the effects of classic panics is to have the central bank and the government step in and take the risks the market can't take."
In a
wide-ranging interview with CNBC touching on a variety of topics:
GEITHNER ON LOST CONFIDENCE
“There's been a tremendous loss of confidence in public institutions and in government. I think Americans still have, again with even the broad improvement in the economy, they still have lost a lot of faith in the capacity of government to do things, to make a meaningful difference in their lives. I think that's going to have – the crisis, partly the crisis and partly the challenges that existed before the crisis, and that's going to be with us for a long time and it's going to take a long time to grow out of that.”
GEITHNER ON CURRENT SYSTEM
“This system is a much more resilient much stronger, much more stable system today than it was in the decade before the crisis. Absolutely. And significantly because these reforms put a huge amount more capital into the system, put in place much tougher rules in risk taking and those are applied much more broadly across the financial system. They have the prospect, they're strong enough to have the prospect if they're not eroded to buy this country a relatively long period of financial stability.”
GEITHNER ON A SLOWER FINANCIAL SYSTEM
“Across the American economy, across the financial system, I think there's no evidence to support the proposition that the economy is slower today because the system has more capital. And in fact I think you could say the opposite. The reason why we designed the stress test and the strategy we did to bring a bunch more capital into the financial system quickly was so that the financial system could provide the oxygen, a growing recovering economy needed to help businesses expand, invest and hire people back into the work force.”
GEITHNER ON U.S. ECONOMY
“I think the American economy if you look beneath the surface is a much more resilient economy now and it's doing really relatively well. I think in many ways it's a stronger economy than it was before the crisis. And again, compared to any of the major economies around the world today, the U.S. is doing better. And again, I think our performance in many ways is the envy of many countries.”
GEITHNER ON CURRENT STOCK MARKET VALUATIONS
Geithner said it is “very hard to know what markets reflect at any given point in time. It's really hard to know, except in retrospect when market prices, valuations are defying gravity."
GEITHNER ON FEDERAL RESERVE CHAIRMAN JANET YELLEN
He called Yellen “a very thoughtful, smart person" and he thinks she is “doing an excellent job."
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