Geithner Says Banks Are Trying to Weaken Financial Overhaul

Tuesday, 04 October 2011 08:10 PM

(Updates with comments on Europe, jobs bill starting in seventh paragraph.)

Oct. 4 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner said banks are trying to weaken efforts to overhaul financial regulation, and “we’re going to push back harder.”

“There’s nothing strange about the fact that the banks are resisting it” Geithner said in an interview today on CNN television. “In the end we’re going to prevail because what we’re doing is a reasonable, sensible thing, which is to make sure the economy is never again vulnerable to this degree of basic abuse, mistakes, excessive risk taking.”

Geithner said bankers are “blaming reforms and the government for everything” including the problems they themselves were “essential to causing.”

Bank of America Corp. joined rivals including JPMorgan Chase & Co., Wells Fargo & Co. and SunTrust Banks Inc. in rolling out new charges for debit-card users as Dodd-Frank Act rules imposed by the Federal Reserve take effect this month. The limits may reduce annual revenue at the biggest U.S. banks by $8 billion, data compiled by Bloomberg Government show.

Geithner did not mention any banks by name in the excerpt broadcast as a preview this afternoon.

The new rules cap the debit card fees banks charge merchants at 21 cents, plus 5 basis points of the total and a conditional 1 cent for fraud-prevention, replacing a formula that averaged 1.14 percent of the purchase price, or about 44 cents.

Recession Odds

Geithner also said the possibility of a renewed recession depends on how effective Europeans are in dealing with their sovereign-debt crisis and Congress acting to improve growth.

Europe’s “caused a lot of damage already, not just in Europe, but around the world,” Geithner said. “And it could do a lot more damage, if they don’t act effectively. But they’ve effectively decided the key things, they’re not going to let the euro break up.”

He added that what Europe hasn’t done yet is “put in place the financial capacity to make that work.” Geithner said Europe is going to move more quickly and with more force.

“They’re going do what they need to do to get their arms around this,” Geithner said. “They haven’t done it yet.”

European finance ministers yesterday delayed a decision to release Greece’s next loan installment until after Oct. 13. It was the second postponement of a vote originally slated for yesterday as part of the 110 billion-euro ($146 billion) lifeline granted to Greece last year.

Growing Risk

Federal Reserve Chairman Ben S. Bernanke said today that the U.S. faces growing risk from the European debt crisis and he is concerned about the impact on American financial institutions and the economy. He added that the direct risk to U.S. banks is “not large” with somewhat larger exposures in money market mutual funds.

“Market uncertainty about the resolution of the Greek situation, about the broader resolution of both sovereign debt issues and the European banking issues has created an enormous amount of uncertainty and volatility in financial markets,” Bernanke said at a hearing of the Joint Economic Committee. “And it’s through that volatility and indirect effects, I think, that we’re being affected now.”

Geithner also urged passage of President Barack Obama’s $447 billion American Jobs Act. He said there is “no credible argument” the plan wouldn’t create jobs.

“People may have better ideas, but we have not seen a plan that would do nearly as much for the economy and be as effective in strengthening the economy, getting more Americans back to work, that has any chance of passing,” he said.

Obama Speech

In Texas today, Obama made his sixth speech in less than a month on the jobs package. Republicans have resisted the president’s jobs deal, and some Democrats are concerned about its viability. Senate Majority Whip Dick Durbin of Illinois has said that there may not be enough votes in his chamber to pass the legislation.

The administration says the plan would reduce payroll taxes for employees and employers, extend jobless benefits, provide $35 billion in aid to states to prevent as many as 280,000 teacher and first responder layoffs, add $30 billion for high school and community college modernization and boost spending on public works projects such as roads and bridges. It also would provide tax breaks for new employers to hire the unemployed.

--Editors: Gail DeGeorge, Christopher Wellisz

To contact the reporters on this story: Cheyenne Hopkins at chopkins@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

© Copyright 2019 Bloomberg News. All rights reserved.

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(Updates with comments on Europe, jobs bill starting in seventh paragraph.) Oct. 4 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner said banks are trying to weaken efforts to overhaul financial regulation, and “we’re going to push back harder.” “There’s nothing...
Tuesday, 04 October 2011 08:10 PM
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