'Substantial' TARP Repayments Soon: Geithner

Substantial repayments by banks of loans from the Troubled Asset Relief Program (TARP) could come soon, while the amount of capital banks are raising could lessen interest in the government’s plan to take toxic assets off balance sheets, Treasury Secretary Timothy Geithner told CNBC Tuesday.

(Watch Steve Liesman's interview with Tim Geithner)

Speaking during a trip to China, Geithner also said that he'd heard a lot of confidence being expressed by the Chinese with regards to the U.S. economy.

Banks that came out of the stress tests with indications they had substantial amounts of capital and have been able to issue unguaranteed debt on a meaningful scale will be able to repay TARP money, he said.

"I think I expect you're going to see substantial repayments from some institutions relatively quickly," Geithner said.

On Monday, JPMorgan Chase , American Express and Suntrust Bank raised capital to repay TARP funds.

Confidence in the banking system may make the Treasury and Federal Deposit Insurance Corp (FDIC) programs to buy asset from banks less attractive, but the programs still have "significant potential value" and the Treasury will work to put them in place, he said.

"As confidence has improved a little bit, we may see less interest -- both on the selling side and the buying side," Geithner said. "It's hard to tell, though, how much interest you're going to see. There's still some concerns, too, about the rules of the game."

Fed Not Monetizing

Geithner also said that the Federal Reserve is "absolutely not" monetizing debt -- which can cause inflation.

"There's no risk of (monetizing) in the United States, because, again, we have a strong central bank, whose obligation under the law is not just to achieve maximum growth, but to keep inflation low and stable over time," he said.

"I am very confident in the president's commitment and awareness in Congress of the importance of getting our fiscal position back to a sustainable path, as soon as we see the conditions for a durable recovery permanently established," Geithner added.

Support from China

Photo by: Pete Souza Timothy Geithner

In addition, the Treasury Secretary is hearing "quite a lot of confidence" in the long-term strength of the U.S. economy and also "the basic policy frameworks" the government has undertaken, he said.

"They understand why we've acted very aggressively in the United States," Geithner said. "Not just on the fiscal front.  Not just with alongside what the Fed has done, but to try to get our financial system working again."

As for the thorny issue of China allowing its currency to float more against other currencies, the Chinese "have committed publicly to continue to move over time towards a more flexible exchange-rate system," he said.

"I think they recognize that that is essential to their broader strategy of rebalancing sources of growth," he added.

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