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CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S MARIA BARTIROMO SITS DOWN WITH TREASURY SECRETARY TIMOTHY GEITHNER TODAY ON CNBC'S "CLOSING BELL WITH MARIA BARTIROMO"

Steffanie Marchese
Monday, 29 Mar 2010 | 6:12 PM ET
Timothy Geithner
CNBC.com
Timothy Geithner

WHEN: Today, Monday, March 29th at 4pm ET

WHERE: CNBC's "Closing Bell with Maria Bartiromo"

In a CNBC EXCLUSIVE interview, CNBC's Maria Bartiromo speaks with Treasury Secretary Timothy Geithner today on "Closing Bell with Maria Bartiromo."

All reference must be sourced to CNBC.

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BARTIROMO: RIGHT NOW OUR EXCLUSIVE INTERVIEW WITH TREASURY SECRETARY TIMOTHY GEITHNER.

GEITHNER: GREAT TO BE HERE

BARTIROMO: CAN YOU TALK TO US ABOUT FINANCIAL REFORM TELLS US WHAT THE MOST AREAS ARE THAT NEED CHANGE AND WILL SEE CHANGE?

GEITHNER: WE ARE GETTING CLOSE. TWO KEY THINGS. THE FIRST IS BASIC PROTECTIONS FOR CONSUMERS AND INVESTORS AND THE SECOND IS ABOUT ENDING TOO BIG TO FAIL AND MAKING SURE THAT THE COUNTRY DOES NOT FACE A CRISIS LIKE THAT DOES NOT COST 8.5 MILLION AMERICANS THEIR JOB AND PUT BILLIONS OF TAXPAYERS' MONEY AT RISK. WE WANT TO MAKE SURE THAT DOES NOT HAPPEN AGAIN.

BARTIROMO: NOW AS FAR AS TOO BIG TO FAIL I WANT TO TALK TO YOU ABOUT CONSUMER PROTECTION AS WELL BUT THERE HAS BEEN SOME DEBAOUT ABOUT TOO BIG TO FAIL, AND WHETHER OR NOT THE DODD PROPOSAL REALLY ADDRESSES THAT RIGHT YOU RECEIVED A LETTER FROM RICHARD SHELBY SAYING THAT THE DODD BILL DOES DOES NOT CURE TOO BIG TO FAIL HIS ISSUES WERE IT LEAVES THE FED WITH EMERGENCY LENDING POWERS THAT COULD BE ABUSED AND SO THE FDIC AND TREASURY GET BROAD DEBT GUARANTEES AND HE HAS PROBLEM WITH THE $50 BILLION FUND THAT REQUIRES THE BANKS TO PAY INTO. CAN YOU TALK TO US ABOUT THAT?

GEITHNER: AGAIN EVEN THERE, I THINK WE ARE PRETTY CLOSE. AND THE PROVISIONS THE DODD BILL REFLECTS A LOT OF THE REPUBLICAN IDEAS AND IDEAS FROM SENATOR SHELBY AND OTHERS AND MAKES THE KEY POINT WHICH IS THAT IF BIG BANKS EVER MANAGE THEMSELVES TO THE EDGE THAT THEY CANNOT SURVIVE WITHOUT GOVERNMENT ASSISTANCE, THE GOVERNMENT SHOULD HAVE THE ABILITY TO COME IN AND DISMEMBER THEM, AND UNWIND THEM AND SELL THEM OFF IN PIECES WITHOUT PUTTING THE TAXPAYERS AT RISK. WE DON'T WANT THE TAXPAYERS TO BE AT EXPOSURE OF BEARING THE COSTS OF THE LARGE FINANCIAL CRISIS. SO ON THOSE ISSUES WE ARE GETTING PRETTY CLOSE, TOO.

BARTIROMO: SO IN TERMS OF THE RESOLUTION AUTHORITY, JUST TO CLARIFY, YOU NEED TO BE ABLE TO SHUT DOWN THE AREAS OF THE BUSINESS THAT ARE NOT WORKING AND KEEP OTHERS WORKING.

GEITHNER: EXACTLY RIGHT.

BARTIROMO: WHICH WE DIDN'T HAVE BACK LAST YEAR?

GEITHNER: ONE WAY TO THINK ABOUT IT IS THIS WAY IS TO USE THE FIREFIGHTING METAPHOR, YOU WANT TO DRAW A FIRE BREAK AROUND THE FIRE, AND MAKE SURE THAT THE FIRE CAN'T JUMP FROM THE FAILING FIRM AND THREATEN THE REST OF THE FINANCIAL SYSTEM. SO, YOU NEED TO BE ABLE TO SHUTDOWN, DISMEMBER, UNWIND, SELL THE FIRM THAT IS FAILING, BUT MAKE SURE THAT THE PROCESS DOES NOT END UP IMPERILING THE REST OF THE FINANCIAL SYSTEM.

BARTIROMO: WHY IS THAT NOT IN PLACE? THAT SEEMS OBVIOUS TO ME

GEITHNER: TRAGIC FAILURE OF THE COUNTRY. WE HAD IT IN PLACE FOR SMALL BANKS BUT WE DIDN'T HAVE A PLACE FOR LARGE COMPLEX INSTITUTIONS THAT DOMINATED THE WORLD FOR FANNIE AND FREDDIE AND AIG AND LEHMAN AND BEAR STEARNS, AND EVEN THE MAJOR BANKS IN THE COUNTRY TODAY, THERE ARE NO TOOLS LIKE THAT. THE PRESIDENTS AUTHORITY THE ONLY AUTHORITY HE HAD WAS TO COME IN AND SHUT DOWN THE MARKETS AND DECLARE A BANK HOLIDAY, NONE OF THE BROAD TOOLS THAT COUNTRIES NEED TO MANAGE THE CRISES.

BARTIROMO: IF YOU ARE IDING THE 23 LARGE INSTITUTIONS AS THE LARGE BANKS OF TOO BIG TO FAIL, ARE WE IMMEDIATELY SORT OF PUTTING A CROSS ON THEIR BACKS AS TOO BIG TO FAIL.

GEITHNER: WELL, EXCELLENT QUESTION.WHAT WE NEED TO UNDERSTAND IS THAT THESE INSTITUTIONS THAT PLAY THIS CRITICAL ROLE IN MARKETS, THEY NEED TO BE SUBJECTED TO TOUGHER CONSTRAINTS THAN RISK TAKING, AND FACE HIGHER CAPITAL REQUIREMENTS THAN SMALL BANK FACE. TO HAVE TO KNOW WHO THEY ARE BECAUSE THEY PRESENT THESE KIND OF RISKS AND THE REASON TO IDENTIFY THEM IS TO MAKE SURE YOU CAN SUBJECT THEM TO TOUGHER CONSTRAINTS ON RISK TAKING.

BARTIROMO: LET ME ASK YOU ABOUT THE SMALLER AREA OF THE SYSTEM WE HAD ELIZABETH WARREN ON EARLIER, AND SHE SAID BY HER ESTIMATES BY THE END OF THE YEAR, HALF OF ALL COMMERCIAL REAL ESTATE LOANS ARE GOING TO BE UNDERWATER AND CONCENTRATED IN THE MID--SIZED BANKS, AND DO YOU AGREE WITH THAT? THAT KIND OF EXPOSURE IN TERMS OF THE COMMERCIAL BANKING INDUSTRY, AND THE POTENTIAL FOR FAILURE IN 2010?

GEITHNER: WELL, COMMERCIAL REAL ESTATE WILL STILL BE A PROBLEM FOR THE COUNTRY AND WE ARE WORKING THROUGH THAT PROCESS AND IT IS GOING TO BE HARD TO MANAGE THROUGH THAT PROCESS. IT IS GOING TO PUT A LOT OF PRESSURE ON SMALL BANKS ACROSS THE COUNTRY WHO GOT THEMSELVES TOO EXPOSED TO COMMERCIAL REAL ESTATE. IT IS GOING BUT WE CAN MANAGE THROUGH THIS PROCESS IT IS GOING TO BE DIFFICULT IT IS GOING TO BE TOUGH IT IS A GOOD REASON TO MAKE SURE WE ARE PROVIDING CAPITAL TO THE SMALL BANKS ACROSS THE COUNTRY THE PRESIDENT GOT A PROPOSAL PENDING BEFORE CONGRESS NOW TO ESTABLISH A SMALL BANK LENDING FACILITY THAT WOULD DO JUST THAT MAKE SURE THAT THE SMALL BANKS CAN COME TO THE TREASURY AND GET CAPITOL IF THEY COMMIT TO USING THAT CAPITAL TO EXPAND LENDING WHICH WILL HELP TO MANAGE THROUGH THE DEBT PROCESS.

BARTIROMO: WHY HAVEN'T WE SEEN MORE LENDING TO SMALL BUSINESSES? IT SEEMS THAT THE CAPITAL IS NOT BEING ACCESSED. IS THIS AN ISSUE WITH THE LARGER BANKS OR EVEN THE MIDSIZED BANKS FEELING THEY'RE NOT IN TERMS OF HOW MUCH CAPITAL THEY NEED TO HOLD?

GEITHNER: WELL, THE MAIN THING IS THAT PEOPLE WANT TO SEE -- AND TALK ABOUT THE PERSPECTIVE OF THE SMALL BUSINESSES.THE MAIN CONSTRAINT THEY FACE STILL IS HOW MUCH DEMAND WILL THEY SEE FROM THE PRODUCTS GOING FORWARD AND WHEN YOU ASK THEM WHAT THEY ARE MOST WORRIED ABOUT, THAT IS WHAT THEY CITE THE MOST AND THAT IS WHY IT IS IMPORTANT THAT WE KEEP ACTING TO MAKE SURE RECOVERY IS STRENGTHENING AND EXTENDS ACROSS THE COUNTRY. THAT IS ONE OF THE MOST IMPORTANT THINGS TO DO.THE WHOLE FINANCIAL INDUSTRY IS IN DRAMATICALLY STRONGER SHAPE TODAY THAN A YEAR AGO OR 18 MONTHS AGO. MUCH STRONGER SHAPE THAN IT WAS BUT SMALL BUSINESSES DEPEND ON SMALL BANKS, AND SMALL BANKS ARE EXPOSED TO COMMERCIAL REAL ESTATE AND HAVE PROBLEMS TO MANAGE THROUGH, AND WE ARE WORKING HARD FOR THEM TO MAKE SURE THAT THE SMALL BANKS CAN GET CREDIT AND VIABLE INSTITUTIONS CAN GET LOANS TO EXPAND THE BUSINESSES, BUT WE PROPOSE THIS FACILITY THAT WE HOPE THAT CONGRESS WOULD ENACT TO, AGAIN, MAKE IT POSSIBLE FOR THE BANKS TO COME TO THE TREASURY AND GET THE CAPITAL TO LEND TO BUSINESS CLIENTS.

BARTIROMO: I WANT TO ASK YOU MORE ABOUT HOW FINANCIAL REFORM WILL PLAY OUT, BECAUSE IT IS IMPORTANT AND WE ARE GOING TO SEE SUBSTANTIAL CHANGE. LET ME COME BACK TO THAT, BECAUSE YOU ARE MAKING THE FINAL PREPARATIONS RIGHT NOW TO SELL THE GOVERNMENT'S STAKE IN CITIGROUP, AND THAT 27% STAKE AND WHY NOW?

GEITHNER: WELL, AGAIN, IT POINTS OUT HOW FAR WE HAVE COME.I MEAN, WE HAVE HAD $175 BILLION OF THE TAXPAYERS' INVESTMENTS COME BACK TO THE TREASURY BECAUSE BEFORE, WE FORCED THESE INSTITUTIONS TO GO OUT THE RAISE PRIVATE CAPITAL TO REPLACE THE PUBLIC'S INVESTMENTS AND WE HAVE EARNED ABOUT $20 BILLION IN PROFITS ON THE INVESTMENTS.THIS IS THE NEXT STAGE OF US MOVING TO MAKE SURE WE ARE GETTING OUT OF THE FINANCIAL SYSTEM AS QUICKLY AS WE CAN, BECAUSE WE DON'T WANT TO BE IN THE BUSINESS OF OWNING A SHARE IN A PRIVATE COMPANY A DAY LONGER THAN NECESSARY, AND IT IS A SIGN OF HOW MUCH PROGRESS WE HAVE MADE ALREADY.

BARTIROMO: NOW, IF THE BANK HAS PAID BACK THE MONEY AND THE TREASURY AND THE GOVERNMENT TAXPAYERS HAVE MADE ALL OF THE MONEY ON THIS, WHY SHOULD THEY HAVE TO GO THROUGH FURTHER PROCESS OF PAYING MONEY INTO THE FUND TO PAY FOR THE MISTAKES?

GEITHNER: FOR THE BASIC SIMPLE REASON OF THE FOLLOWING WHICH IS THAT THE GOVERNMENT IS STILL EXPOSED TO RISK OVER LOSS FOR THE ACTIONS WE HAD TO TAKE TO PUT OUT THE FINANCIAL FIRE.THE TAXPAYER SHOULD NOT HAVE TO BEAR THOSE LOSSES, ANY OF THOSE LOSSES. CONGRESS IS REQUIRING US TO PROPOSE WAYS TO MAKE SURE WE RECOUP THE LOSSES. SO WE PROPOSE A STRAIGHT FORWARD COMMON SENSE THING, WHICH IS TO HAVE THE INSTITUTIONS WHO BENEFITED THE MOST FROM THE ACTIONS WE TOOK TO FIX THE MESS TO MAKE SURE THEY ARE NOT THE TAXPAYERS ARE NOT PAYING FOR THE COST OF THE CRISIS. SO WHERE THERE ARE ADDITIONAL LOSSES, WE WANT THE LARGEST INSTITUTIONS IN THE COUNTRY TO PAY FOR LOSSES.

BARTIROMO: THIS IS GOING TO BE ONE OF THE BIGGEST SALES COMING TO MARKET.YOU CHOSE MORGAN STANLEY TO HANDLE THE DEAL, AND WHY MORGAN?

GEITHNER: WELL, THAT IS NOT A DECISION I CAN SPEAK TO. WE HAVE A GOOD TEAM OF PEOPLE WHO LOOKED AT THE COMPETITION CAREFULLY, AND THEY MADE A GOOD JUDGMENT.

BARTIROMO: YOU OWN ALMOST 30% OF CITIGROUP, WHY CAN'T THEY DO IT?

GEITHNER: THAT IS A GOOD QUESTION, BUT AGAIN, I LEFT MY JUDGMENT TO THE COLLEAGUES IN THE TREASURY AND THEY LOOKED AT A VARIETY OF PROPOSALS AND THOUGHT THIS MADE THE MOST SENSE

BARTIROMO: WILL MORGAN BE THE SOLE UNDERWRITER?

GEITHNER: I AM NOT SURE I CAN SPEAK TO THAT BUT I AM SURE THE ANNOUNCEMENT TODAY CLARIFIED THAT

BARTIROMO: HOW LONG -- CAN YOU TALK TO US HOW IT WILL PLAY OUT?

GEITHNER: WELL, WHAT WE ARE PROPOSING TO DO, BECAUSE WE DON'T WANT TH GOVERNMENT MAKING MARKET-TIMING DECISIONS AND GET OUT AS QUICKLY AS POSSIBLE WHICH IS A PROCESS WHERE THE GOVERNMENT WOULD SELL ON A REGULAR BASIS A SPECIFIC SHARE OF TRADING VOLUME WHICH WILL TAKE US SEVERAL MONTHS THERE TO UNWIND THE SHARES. AND THAT SEEMED LIKE A SENSIBLE WAY TO DO IT.

BARTIROMO: WHAT KIND OF PROCESS WAS INVOLVED? I KNOW IT WAS A HOTLY, YOU KNOW, CONTESTED WIN.MORGAN WAS REAL SUCCESSFUL, BUT THE OTHERS WANTED IT, AND I WHAT DID YOU LOOK AT I KNOW YOU HAD A TEAM DOING IT.

GEITHNER: AND AGAIN, THE BASIC JUDGMENTS WE WANTED THE TAXPAYERS PROTECTED TO THE EXTENT WE COULD, AND MAXIMIZE THE RETURN TO THE TAXPAYERS AND WE WANT TO GET OUT AS QUICKLY AS POSSIBLE, BECAUSE WE DON'T WANT THE UNITED STATES GOVERNMENT TO STAY IN A FINANCIAL INDUSTRY OR ANY COMPANY A DAY LONGER THAN NECESSARY.

BARTIROMO: ARE THERE OTHER SALES THAT WE SHOULD EXPECT OF OTHER FINANCIAL INSTITUTIONS THAT THE GOVERNMENT WILL BE UNWINDING?

GEITHNER: WE STILL HAVE SOME INVESTMENTS LEFT ACROSS THE FINANCIAL SYSTEM, AND AGAIN, WE ARE GOING TO ADOPT A CAREFUL PROCESS FOR MAKING JUDGMENTS FOR HOW TO BALANCE THE TWO OBJECTIVES. WE WANT TO MAXIMIZING THE RETURN OF THE TAXPAYER AND MINIMIZING THE RISK OF AVOIDABLE LOSSES AND WE WANT THE GOVERNMENT OUT OF THE BUSINESS OF INVESTMENTS IN THE ECONOMY AS QUICKLY AS WE CAN.

BARTIROMO: ARE WE GOING THE SEE ANY SALE OF FANNIE AND FREDDIE OWNERSHIP?

GEITHNER: FANNIE AND FREDDIE ARE PART OF A MORE COMPLEX PROCESS OF REFORMS WE HAVE TO CONSIDER OVER THE NEXT SEVERAL MONTHS. WE HAVE TO LOOK AT THE BROAD HOUSING FINANCES IN THE COUNTRY. THAT SYSTEM WORKED WELL FOR THE COUNTRY FOR MANY, MANY DECADES, BUT AS YOU CAN SEE, LARGE PARTS OF IT ARE BROKEN. SO WE ARE GOING TO BE PROPOSING REFORMS TO THE CONGRESS NOT JUST FOR FANNIE AND FREDDIE BUT BROADER REFORMS TO MAKE SURE WE HAVE A HOUSING FINANCE SYSTEM IN THE FUTURE TO DO A BETTER JOB OF PROVIDING A STABLE SOURCE OF LOW-COST MORTGAGES TO THE AMERICAN PEOPLE.

BARTIROMO: WILL YOU SELL A STAKE IN AIG ANY TIME SOON?

GEITHNER: AIG, AS YOU HAVE SEEN, IS MAKING INCREDIBLY RAPID PROGRESS IN PUTTING IN PLACE RESTRUCTURING PLAN THAT BRINGS DOWN THE RISKS IN AIG FINANCIAL PRODUCTS WHICH IS WHERE A LOT OF THE RISK WAS CONCENTRATED. THAT RISK HAS COME DOWN VERY, VERY RAPIDLY TO A MUCH MORE MODEST LEVEL NOW, AND AS YOU HAVE 'N THE BOARD OF THE COMPANY HAS ANNOUNCED A SERIES OF VERY, VERY SUBSTANTIAL SALES OF LARGE BUSINESS, AND AGAIN, ALL DRIVEN BY THE OBJECTIVE TO MAKE SURE WE ARE MINIMIZING THE RISK OF LOSS TO THE TAXPAYER AND GET THE TAXPAYER OUT OF THE COMPANIES AS QUICKLY AS WE CAN.

BARTIROMO: AND VIKRAM PANDIT HAS BEEN SLAYING DOWN CITIGROUP QUITE A BIT.

GEITHNER: OUR FINANCIAL SYSTEM TODAY IS IN A MUCH, MUCH STRONGER POSITION THAN IT WAS A YEAR AGO, TWO YEARS AGO, THREE YEARS AGO BEFORE THE CRISIS, IN PART, BECAUSE WE HAVE HAD A HUGE WRENCHING RESTRUCTURING OF THE SYSTEM, A LOT OF THE WEAKEST PARTS OF THE SYSTEM NO LONGER EXIST TODAY BECAUSE WE MOVED SO QUICKLY TO RECAPITALIZE THE SYSTEM WITH PRIVATE MONEY. THIS IS A MUCH STRONGER SYSTEM THEN IT WAS AND WE ARE COMING OUT OF THE CRISIS MUCH MORE QUICKLY, MUCH STRONGER THAN IS TRUE FOR I BELIEVE ANY OTHER MAJOR ECONOMY.

BARTIROMO: SO, THE GOVERNMENT IS GETTING OUT OF THE CITI STAKE, SO SHOULD WE ASSUME THAT THINGS ARE REBOUNDING AT CITIGROUP?

GEITHNER: WELL, I THINK YOU CAN SAY GENERALLY THAT AS THE ECONOMY IS GETTING STRONGER AND THE ECONOMY IS GETTING STRONGER. WE ARE PROBABLY JUST ON THE VERGE NOW OF A WHAT WE THINK TO BE A SUSTAINED PERIOD OF JOB CREATION, FINALLY. AND WE ARE GOING TO CONTINUE TO REINFORCE THE RECOVERY. THE FINANCIAL SYSTEM AS A WHOLE, AS I SAID IS IN A MUCH STRONGER PLACE. AGAIN, THE CRITICAL THING WE DID WAS TO MOVE QUICKLY AND NOT JUST TO STABILIZE IT, BUT MAKE SURE WE RECAPITALIZED THE FINANCIAL SYSTEM WITH PRIVATE MONEY.

BARTIROMO: SO, WOULD YOU SAY THAT THE BANKING SYSTEM TODAY IS ADEQUATELY CAPITALIZED?

GEITHNER: I WOULD SAY THAT THE MAJOR BANKS TODAY HAVE A MUCH STRONGER CAPITAL POSITION THAN THEY DID ANY TIME OVER THE LAST THREE YEARS OR SO. SMALL BANKS ACROSS THE COUNTRY, YOU KNOW ONE OF THE GREAT STRENGTHS OF THE COUNTRY IS THAT WE HAVE A COUNTRY OF 9,000 BANKS. THOSE 9,000 BANKS ARE A GREAT SOURCE OF STRENGTH AND DIVERSITY, BUT OF COURSE, MANY OF THE INSTITUTIONS STILL HAVE A LOT OF CHALLENGES AHEAD. WE ARE, YOU KNOW, THE, MY COLLEAGUE SHEILA BAIR AND THE OTHER BANKING SUPERVISORS ARE WORKING THROUGH THOSE CHALLENGES CAREFULLY.

BARTIROMO: TWO WEEKS AGO, BARNEY FRANK PUT UP THE QUESTION OF WHETHER THE GOVERNMENT WILL BACK THE HOLDERS OF FANNIE AND FREDDIE PAPER. IS THERE ANY DIFFERENCE OF THE BETWEEN A HOLDER OF THIS PAPER VERSUS GOVERNMENT BONDS?

GEITHNER: I WILL SAY WHAT I SAID IN THE HEARING AND I WILL NEVER CHANGE THIS THE BASIC VIEW. WE HAVE MADE IT CLEAR, WILL PROVIDE WHATEVER CAPITAL IS NECESSARY TO MAKE SURE THAT THOSE TWO INSTITUTIONS CAN MEET THEIR OBLIGATIONS PAST AND FUTURE. THAT IS A VERY IMPORTANT COMMITMENT, AND I'M GOING TO STICK TO THAT.

BARTIROMO: SO YOU ARE EXPLICITLY GUARANTEEING THE COMBINED 1.6 TRILLION DOLLARS IN DEBT AND 5 TRILLION DOLLARS IN MORTGAGE BACKED SECURITIES THEN?

GEITHNER: I WILL SAY IT EXACTLY THEY WAY I SAID IT. I'M GOING TO MAKE SURE THAT PEOPLE UNDERSTAND THAT WE WILL PROVIDE WHATEVER CAPITAL IS NECESSARY TO THOSE INSTITUTIONS TO MEET THE OBLIGATIONS PAST AND FUTURE. AND THAT'S AN IMPORTANT THING TO DO AGAIN, BECAUSE THEY ARE SO IMPORTANT NOW TO MAKE SURE THAT AMERICANS HAVE ACCESS TO AFFORDABLE MORTGAGES ACROSS THE COUNTRY.

BARTIROMO: HOW DO YOU THINK THAT CHANGES IN THE COMING YEARS IN TERMS OF IMPLICIT, EXPLICIT BACKING? DO WE WALK AWAY FROM THAT EVENTUALLY LONGER TERM? PEOPLE HAVE ALWAYS BEEN UNCOMFORTABLE WITH THIS?

GEITHNER: WE ARE NOT GOING BACK TO THE SYSTEM THE WAY IT WAS, AND NO SENSE FOR THE COUNTRY TO HAVE THAT COMPLICATED MIX OF PRIVATE SHAREHOLDERS, BUT PUBLIC INTEREST WITH THE IMPLICIT SENSE THAT THE GOVERNMENT WILL BE THERE TO PROTECT THEM FROM LOSS. WE ARE NOT GOING TO RECREATE THAT SYSTEM SO WE ARE GOING TO HAVE TO CHANGE THE SYSTEM FUNDAMENTALLY BUT THIS IS COMPLICATED, DIFFICULT TO DO AND WE WANT TO DO IT CAREFULLY AND WELL. AGAIN, THIS IS NOT JUST ABOUT FANNY AND FREDDIE IT IS ABOUT THE ENTIRE MORTGAGE FINANCING BUSINESS.

BARTIROMO: PROPRIETARY TRADING, SHOULD WE BE TREATING BANKS LIKE UTILITIES? CAN YOU REALLY SEPARATE PURE VANILLA LENDING FROM RISKIER SECURITIES AND HEDGE FUND, PRIVATE EQUITY TYPE BUSINESS?

GEITHNER: NOT UTILITIES. AGAIN WE THINK OUR SYSTEM IS BEST SERVED BY HAVING PRIVATE SHAREHOLDERS MAKE GOOD JUDGMENTS ABOUT HOW TO ALLOCATE THE SAVINGS OF AMERICANS TO THE INVESTMENT NEEDS OF CORPORATIONS IN THE COUNTRY AND TO FAMILIES ACROSS THE COUNTRY THAT SYSTEM WORKS BEST WHEN YOU HAVE THAT MIX OF PRIVATE INCENTIVES THERE, BUT THE GOVERNMENT HAS TO DO A BETTER JOB OF CONSTRAINING THE RISK TAKING ACROSS THE SYSTEM AND THAT'S ABOUT MORE CONSERVATIVE CAPITAL REQUIREMENTS ENFORCED ACROSS THE SYSTEM, ELIMINATING LOOPHOLES MAKING IT HARDER ON PEOPLE TO AVOID THE BASIC PROTECTIONS THE GOVERNMENT HAS TO PROVIDE, BUT PART OF IT IS ABOUT TRYING TO MAKE SURE THAT BANKS DON'T TAKE ADVANTAGE OF ACCESS TO THE SAFETY NET TO SUBSIDIZE TO KIND OF RISKY ACTIVITIES THAT COULD CONTRIBUTE TO FUTURE CRISES.

BARTIROMO: LET ME GET YOUR TAKE HERE AS WE WRAP UP, TREASURY IS SCHEDULED EVERY 15th OF APRIL AND OCTOBER 15th TO RULE ON THE CURRENCY PRACTICE OF COUNTRIES AROUND THE WORLD. THE CURRENCY MANIPULATOR RULE QUESTION, NOW HONG KONG HAS HAD THEIR CURRENCY PEGGED TO THE DOLLAR FOR LONGER THAN CHINA. SO THE U.S. OBJECTS TO CHINA PEGGING ITS CURRENCY TO THE DOLLAR SO ITS OBVIOUS THAT THE U.S. DOES NOT OBJECT TO THE HONG KONG CURRENCY PEGGED TO THE DOLLAR. WHY IS THAT?

GEITHNER: WELL, THERE ARE COUNTRIES AROUND THE WORLD THAT RUN FIXED EXCHANGE REGIMES THROUGH CURRENCY BORDERS LIKE HONG KONG OR OTHER TYPES OF MONETARY ARRANGEMENTS AND FOR SMALL ECONOMIES IN PARTICULAR CIRCUMSTANCES THAT MAKES SENSE. BUT CHINA IS IN A DIFFERENT SENSE, CHINA IT IS A VERY LARGE ECONOMY AND THE CHINESE LEADERSHIP HAS RECOGNIZED FOR A LONG PERIOD OF TIME IT IS IMPORTANT FOR THEM AS A COUNTRY TO MOVE OVER TIME TO A MORE GRADUAL AND FLEXIBLE EXCHANGE RATE SYSTEM, THAT IS AN OBJECTIVE THEY HAVE STATED PUBLIC AND COMMITMENT THEY HAVE MADE. CHINA HAS A GOOD RECORD IF YOU LOOK OVER THE LAST THREE DECADES OF SETTING OUT BROAD REFORMS AND DELIVERING ON THOSE REFORM COMMITMENTS. THIS IS SOMETHING THEY HAVE RECOGNIZED IS IMPORTANT TO THEM IN THEIR INTEREST, AND THAT IS WHY I HAVE SAID MANY TIMES AND I'M NOT SAYING ANYTHING NEW TODAY, THAT I THINK IT IS QUITE LIKELY THAT CHINA WILL DECIDE IT IS IN ITS INTEREST TO MOVE TO A MORE FLEXIBLE EXCHANGE RATE RATE SYSTEM.

BARTIROMO: SECRETARY GEITHNER ITS REALLY GREAT TO HAVE YOU ON THE PROGRAM TODAY AND THANK YOU FROM THE WOMEN IN FINANCE SYMPOSIUM TODAY. I WAS REALLY SO IMPRESSED WITH SO MANY SENIOR PEOPLE WOMEN IN GOVERNMENT.

GEITHNER: I AGREE AND THANKS FOR MODERATING TODAY. WE HAVE A LONG WAY TO GO, BUT THERE ARE SOME REALLY STRONG LEADERS IN THE COUNTRY THAT WERE PRESENT TODAY.

BARTIROMO: IT WAS A PLEASURE TO SEE THEM AND SHARE THE STAGE. SECRETARY GEITHNER GOOD TO HAVE YOU ON THE PROGRAM

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