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Jennifer Dauble



Following is the unofficial complete transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Timothy Geithner today. Excerpts of the interview will run throughout CNBC’s Business Day programming. All references must be sourced to CNBC.

STEVE LIESMAN: So, what are you doing here in New Hampshire? Some people say you might be running for office?

TIM GEITHNER: No risk of that. Lots of people should be reassured by that.

STEVE LIESMAN: Okay. What’s-- what’s the focus of your trip?

TIM GEITHNER: I came here with a bunch of businesses. Find out what’s happening on the ground in New Hampshire. So, I talked to a lot of them. A lot of manufacturing companies like-- like the state as a whole. And, you know, they say what people say across the country. They say things are gradually getting better. Still a lot of caution out there. And they would like us to figure out how to do a deficit deal, a budget deal that’s good for the economy. You see some gradual improvement. So—

STEVE LIESMAN: It’s an interesting state. Where unemployment is lower than the average. What do you think the reason for that is?

TIM GEITHNER: It’s very-- very good question. Good example for the country in many ways. New Hampshire was much more careful in the boom. You know, they didn’t let housing get away from them. House prices didn’t rise that much. And it’s an economy that’s built much more on manufacturing, on people building, creating things that are real. And New Hampshire’s done Better than the nation because of that. Unemployment’s much lower than the national average. Unemployment’s come down much further, much faster, and they’ve had no bank failures.

It shows what you can do when you don’t build a recovery on the artificial foundation of a consumption led or housing led recovery. So, it’s-- I think it’s encouraging for the country. Again, you see exports growing faster than anywhere else in the country. Up about 50 percent since the recovery started. And it’s much more manufacturing intensive part of the country than many other states.

STEVE LIESMAN: So, is that what-- what happened in the United States, you think? Once we work through our leverage issues?

TIM GEITHNER: Yeah, I think so. I think, again, what’s happening in the American economy is we’re still digging out of working through the big imbalances that-- caused the crisis in housing. People borrowed too much generally. They still have to bring down debt. And-- and that’s producing a slower recovery than anybody would like. We’re also seeing a bunch of new headwinds. You know, you saw gas prices go up, they’re coming down a little bit. You saw Japan happen.

Construction weak because of weather. State and local government’s still pulling back. Europe a little bit-- tentative still. And so, growth is slower than-- it’s been. But most of the slowdown seems to be temporary factors over time. You know, it should fade. I think if you look past that, you look past the parts of the economy that are most affected by the crisis, like housing, construction-- you’re seeing export growth and investment growth. Pretty encouraging signs of resilience-- which is good for the future.

STEVE LIESMAN: And once we get past even this temporary slowdown, if that’s what it is-- we’re still left with a fairly lackluster recovery. Do-- do you ever see-- I mean, do you see growth in the near term exceeding potential—

TIM GEITHNER: Oh, yeah, absolutely. I think that-- and people-- what most forecasters who are good at this business, there’s not many who are really good at it. But you know what most people are saying about the second half. They still see an economy that’s growing three to four percent. That’s longer than-- above potential. You know, potential for us over the long run is about two and a half percent.

If we get growth like that, you’ll see private sector jobs continue. Unemployment rate will gradually come down. And that’s a perfectly achievable outcome for us. We’ve just got to make sure we do things in Washington to make that more likely. Not less likely.

STEVE LIESMAN: I want to get to a lot of that in just a second. But just a little bit more on the economy. Fed Chairman, Ben Bernanke, said the other day that he wasn’t sure how much of the slowdown was temporary and how much was permanent. Do you have concerns that there could be some more structural permanent issues out there?

TIM GEITHNER: Well, again, there’s nothing certain in these kind of things. And you can’t know with confidence. Again, looks what’s happened-- in the U.S. economy just the last six months. You had a big rise in oil prices and a big effect on consumer’s pocketbooks and confidence. You had a catastrophe in Japan that had very major impact on manufacturing. Temporary impact, but major impact. You had a lot of terrible weather that depressed construction spending.

You saw defense spending in the first quarter be very, very low. State and local governments are still pulling back. You know, you have the Europe cloud. So, that is a lot to happen. And I think most people say you can attribute about two thirds of the slow down relative to expectations to those factors. Not all of it. Of course, the risk always is that weakness will accumulate. And that’s why it’s so important in Washington doing things that improve confidence, not hurt confidence.

STEVE LIESMAN: It can’t be improving confidence to have the Republicans walk out of the debt ceiling negotiations. You’ve been very confident there would be a deal. Are you less confident today?

TIM GEITHNER: There has to be a deal. I mean, just to say. There’s no alternative-- to a deal. You know, we have large unsustainable deficits. We have to bring them down. The country and the world are watching. They’re waiting for us to do that. They need to show-- we need to demonstrate to them that we can live within our means again. So, we have to reach agreement. It has to be bipartisan. Because you can’t do anything with just one party now in Washington. You have divided government.

It’s going to take Republicans and Democrats. There’s going to be compromise on both sides. But we have to do it. The question is will we have a good agreement or an agreement that is less good. And what we want to make sure is we get an agreement this going to be good for growth, good for the economy in the short run and in the long term. You know, a more growth friendly package of reform.

STEVE LIESMAN: Is it right to say the Obama Administration will not accept an agreement that does not include enhanced tax revenues?

TIM GEITHNER: Well, we wanted there to be a balanced agreement. And the tests we’re going to apply is it fair? What’s it going to do for growth, short term, and long run? And does it have shared sacrifice and compromise? That-- that’s the test for us. Now, you know, we’re not going to solve all this in the next three weeks or the next two weeks or so. But we’re going to try to make as large a down payment, in terms of deficit reduction, as we can. Because we need to have the confidence.

STEVE LIESMAN: So, does that mean you’d accept a smaller deal that didn’t have-- revenue enhancement?

TIM GEITHNER: We’re going-- I think-- I try to focus on what’s good for the country, what’s good for the economy. And the-- the best thing for the economy is that it has as large a down payment as possible. And you’re not going to get a large enough contribution to these big deficits without doing a more balanced comprehensive deal. That-- I think that’s the basic reality.

STEVE LIESMAN: One of the criticisms of the Obama Administration is regulation. That there’s too much of it. And that that is responsible for why we’re having lackluster job growth now.

TIM GEITHNER: I think there’s almost no basis for that concern. I mean, it is true that we messed up our financial system and that we had to reform it. And we’re putting in place the basic protection that countries need to protect themselves from excess in the financial system. But that’s not having a meaningful effect.

If you look at the access to credit for the vast bulk of the American economy-- cost of credit, availability of credit is much, much higher today than it was before Dodd Frank bill passed. It’s much better today. Much better access today. We have some stuff to work through still, but it’s better today than it was before that. Now, there’s a lot of change coming to health care. And people have to adjust to that. But that’s because everybody recognized we need to get health care cost growth down over time.

STEVE LIESMAN: And—But business complaining that the-- for example, the new health care bill is a reason not to hire people.

TIM GEITHNER: I don’t think there’s-- I don’t think that-- that’s actually fair and right. It is true to say that people want health care cost growth to slow. And they want to make sure that reforms we’re putting in place are going to do that. But, you know, we need to have a country where people get access to health care. And we’re trying to do that in a way that’s fair. And what this bill does is-- you know, most companies want to hire good people.

They want to be able to give people health care. What the bill does is make it easier, more economic for that to happen. So, it’s helpful against that basic cost over time. Now, of course, it’s going to-- people have to adjust it. You know, they want to see what the reforms do. But I don’t-- I don’t think there’s any basis-- for the argument that that set of uncertainty is a meaningful contributor to the growth we’re seeing so far.

Remember, the big forces that affect the American economy are digging out of the headwinds, the big excesses and imbalances that caused the crisis. And-- we really work through those. We’re working through those. And if you look beyond those. If you look at what’s happening with export growth, private investment growth, what’s happening with innovation. You look at high-tech manufacturing, agriculture, this is a very resilient economy. And we’ll get through this.

STEVE LIESMAN: One of the regulations that’s criticized-- is-- is the banking regulation in Dodd/Frank. Jamie Dimon got up recently in Atlanta. The day after you spoke down there. And said-- you guys haven’t looked at the comprehensive-- nature of all of these things and the affect on the lending system. And he’s afraid that we’re going to look ten, 20 years back and see-- that these-- these regulations caused lending to decline.

TIM GEITHNER: Well, let me tell you what we’re trying to do. Remember we had a crisis that caused devastating damage. And a lot of people who spent decades telling the world they knew how to manage risk did not know what they were doing. And we have to clean that up and fix it to protect American businesses and average people from the excesses of that crisis. We’re going to do that carefully. And restore the great strength of the American financial system. Makes it a more stable system that’s still a more-- a more innovative efficient dynamic. I mean, we can do that.

Part of that is to make sure that banks hold more reserves, more cash cushions, more capital against the risk they take. And capital requirements were too low. As bankers around the world recognized. And we’re going to make them higher. We’re going to do it in a way that-- where it’s phased in over time and will make the system stronger over time. Now, of course, absolutely, we have to look at the overall effects of these reforms on stability and on the economy as a whole.

STEVE LIESMAN: Have you done that?

TIM GEITHNER: That’s exactly what we’re doing. And it’s very important point for everyone to recognize. And this is true, not just in finance, but everywhere. We want to make sure the government of the United States, all the people responsible for these safeguard, overall look at the their overall impact. Because, you know, you want to make the system more stable, but not-- not in a way that would substantially impair the abilities of companies to access capital in the future

STEVE LIESMAN: So, what-- I mean, is there an actual process going on right now? Where the Treasury is studying the overall comprehensive effects of Dodd/Frank?

TIM GEITHNER: Well, we are all together. And this is an important thing to do. And it’s what the new council will force to do. We want to make sure people look at these things on an integrated basis. Now-- now, see we are, I think, getting closer. I think the feds getting closer. We’re-- the central banks and supervisors around the world have reached an agreement on these capital reforms. And I think you’re gonna see relatively soon them come together and provide some certainty.

STEVE LIESMAN: I want to talk about that in just a second. But wouldn’t you acknowledge the Volker rule. faster than even the global regulators on derivatives regulation. Global SIFI surcharge. All of these things. Wouldn’t you acknowledge that is gonna have a chilling effect on lending?

TIM GEITHNER: Well, we’re gonna be very careful to make sure we get the balance right. Again, we have to find a balance – their is no perfect balance. between more stable systems. If people can be more confident, it’s not gonna kind of produce the crisis we saw recently. But do so in a way that’s not gonna be bad for growth over the long run. It’s an important balance to get right. And I’m really confident we can get that right.

STEVE LIESMAN: Your-- regulators are meeting in Basel, I understand, this weekend. They’re talking about what we’ve reported. A surcharge on the biggest banks for being big of two to two and a half percent. Is that about the number that you feel is right?

TIM GEITHNER: Well, I don’t want to talk to the number-- be-- because that’s really the Fed’s responsibility. Let me tell you how we think about this. Again, we want to make sure the largest institutions, that create the most-- largest potential risk to the economy when they make mistakes, are forced to hold more capital against the risk they take. That’s a reasonable proposition.

No reason why we should be adding the burden on institutions that were not-- not a cause of the crisis overall. And the big institutions are the ones that inherently take the most risk. That’s fair, it’s good economic policy, good economics. And I think it’s widely accepted. Something I believe in very strongly. Now, we’re gonna make sure that as we do this, that people have time to adjust to those requirements over time. And we make sure that world puts in place a level playing field. So, we don’t see business just move outside the United States. That wouldn’t do much good for us.

So, we have to get that balance right. But the American banks are in a very strong position to meet these new requirements. They’re literally way ahead of much of the rest of the world. They have much more capital. And they are absolutely gonna be in the stronger position, because we’re gonna, again, restore what’s the great strength of the U.S. financial system was. We had the best standards in the world. And we lost our way in the crisis. And we’re gonna make sure we get that back.

STEVE LIESMAN: How do I ask this question if you don’t want to give me the number? But my understanding is that with the global capital surcharge of two, two and a half percent, most major American banks wouldn’t actually have to raise capital.

TIM GEITHNER: As I said, you’re-- you’re-- I think you’re making my point. The-- the U.S. banks are in a very good position, because we forced them to raise so much capital in the crisis to meet these new standards-- without being at a significant disadvantage.

STEVE LIESMAN: So, I’m making your point, but you’re not confirming my numbers.

TIM GEITHNER: I can’t do that. But I will say one more thing, which is, you don’t want to focus just on the-- on the number. You want to make sure that the overall framework is not so complicated that people can’t understand it. That it can’t be gained over time. The country’s be forced to adhere to a common standard for these things. So, you know, we’re taking a careful look at what they propose. But we’re gonna look at the overall effect of the package.

STEVE LIESMAN: Would you-- are you-- do you support a re-- repatriation -- a-- what’s the word? An amnesty or-- or one time repeal of the repatriation tax on foreign income or foreign profits?

TIM GEITHNER: My view Steve is that we need to do a comprehensive reform of our corporate tax system that strengthens incentives for investing in the United States. We want to see more stuff built and created in the United States. By not just U.S. Companies, but by foreign companies. Tax reform is essential to that objective. And as part of that, we’re willing to look at that kind of proposal.

But only in that context. We can’t do it outside that context, because it’s expensive. It probably doesn’t really help doing Only goes to benefit a few small number of companies. But in the context of an overall agreement that is good for investment in the United States, we can take a look at that.

STEVE LIESMAN: We-- we sat down in February and you talked about corporate tax reform. It doesn’t seem like a whole lot has happened since then.

TIM GEITHNER: Oh no, there’s lot-

STEVE LIESMAN: What’s happened on reform on the corporate tax system.

TIM GEITHNER: Well, we spent a lot of time starting to design a central proposal and-- and a good set of options for people to look at. But, you know, we’re trying to resolve this budget, debt limit negotiation. That’s more important than anything else right now. Once we get that done, we can turn to some of those other things. Its another good reason to get this done. It’s not just because we don’t want the world to really have any doubt that we’re gonna meet our obligations and get our fiscal house in order.

It’s because we have a lot of challenges to meet as a country. We need to get this stuff behind us, so we can turn to things like making investments so that it is better in the United States, financing infrastructure-- improving education, extending exports, and those kind of things that really matter for the long run.

STEVE LIESMAN: When you talk to people about what’s happening in the-- administration right now, they want to know where’s the plan? Where’s the plan to create jobs? Could you-- could you just tell us what, in detail?

TIM GEITHNER: Most important thing the government can do now-- remember, you know, it’s the private sector that creates jobs. And the government, after doing exceptional things in the crisis to prevent a second Great Depression, is pulling back. And going back to living within its means. That’s a necessary, healthy thing. So, for the U.S. economy to grow. We need to make it this the best place to a start to build a business.

We have to make sure we’re strengthening exports. You’re seeing more investment here. We’re providing support for innovation. We’re renewing manufacturing. We’re financing infrastructure. All those things are things that matter most. But to do all those things, we have to make sure we put in a place a sensible, good for growth, long-term fiscal framework, which is what we’re working on so hard now.

STEVE LIESMAN: But give me some specifics here. What is it that you can say the administration is doing today that will create jobs tomorrow? Next month, the month after? Three months from now?

TIM GEITHNER: We’re negotiating trade agreements to give American companies more access to foreign markets which are growing very rapidly. Exports have been leading the recovery, they’re growing very rapidly. We’re trying to make better incentives for investment in the United States through corporate tax reform, making permanent—the tax credit we provide for research and development in the United States.

We’re looking for ways to get Congress to agree to provide more financing for infrastructure. That’s a very good source of construction jobs. Very important to the cost of doing business in the United States. Those are just some of the things that we think are important over time. And I think fundamentally, for the health of the American economy, we need to see people in Washington demonstrate they can come together and solve some problems.

STEVE LIESMAN: Is traditional stimulus under consideration for this economy?

TIM GEITHNER: Well, one of the things we have to look at as we negotiate a long term budget agreement is to make sure we’re doing things that are good for the recovery in the short term. Part of that is making sure we don’t make the mistake many countries have made over time, which is to put on the brakes much too sharply, much too quickly when growth is still modest and unemployment’s still very high.

That’s one very important thing we have to make sure we do. The other thing is to make sure that the-- the-- the pain is balanced and spread out. If we spread it out across the government as a whole, find savings, then we can do this without putting undue burden on the economy as a whole.

But we’ll keep looking in these discussions for things we can do to help, you know-- the test for us should be what’s gonna be good for investment in the United States. What’s gonna help reduce some of the burdens on Americans today. What’s gonna be good for job growth like infrastructure. And if we have a chance to do that, as part of this deal and to try and do that.

STEVE LIESMAN: What about extending the payroll tax cuts?

TIM GEITHNER: You know, Congress is gonna take a look at that. A lot of discussion about that. That would be helpful for the economy. Abs-- absolutely. But we have to see what we can get support for. You know, the basic reality in Washington is that we have to legislate, we need Republicans and Democrats to legislate. And, you know, the challenge we all face is trying to find where we can get people to come together on things that’ll be good.

STEVE LIESMAN: But you’re not saying-- you’re not ruling out additional stimulus. For example, additional government spending or even deficit spending.

TIM GEITHNER: Well, I think our deficits are gonna have to come down. But they’re gonna have to come down gradually over time. We don’t need to do this all in two years. The reason why were talking about a ten-year plan. And so, we have a chance to do it gradually, so the economy can adjust to that.

STEVE LIESMAN: So, we’re gonna do a bunch of this on the Kudlow report tonight. And-- and Larry’s gonna ask me what did the treasury secretary say about when he’s gonna see a corporate tax reform vote. When are we gonna see it?

TIM GEITHNER: Well, tell him that if he helps us get a good budget agreement. That’s good for the economy. Then we’ll have a chance to talk about that.

STEVE LIESMAN: But you can’t put a date on it? In September, we could see it--

TIM GEITHNER: Well, we’re gonna have-- we’re gonna--

STEVE LIESMAN: Is there a proposal inside Treasury right now?

TIM GEITHNER: There is. And it’s an excellent proposal.

STEVE LIESMAN: And it will see the light of day after the debt ceiling negotiations? Or it’s part of the debt ceiling--

TIM GEITHNER: It should. But again, we have to get that done on some sensible terms. That’s-- that’s the overwhelming priority right now. And once we get that done, then we can look at a lot of things.

STEVE LIESMAN: Okay. There was talk-- not too long ago-- actually, there’s talk every six months or so about you leaving this job. How long do you plan to stay?

TIM GEITHNER: People have asked me that almost every day since I took office. Mostly that they hope I’m leaving soon.


TIM GEITHNER: And I don’t have anything particularly insightful to say about that today.

STEVE LIESMAN: Just last-- last question is-- situation surrounding Greece and Europe. How much of a threat is it to the U.S. economy?

TIM GEITHNER: Oh, it-- it should not-- should not be-- does not need to be a threat to the U.S. economy. Because, you know, obviously Europe has to manage this carefully. And it’s something they can manage. And very important they manage it carefully, because we don’t want to add to the pressures on the rest of the Europe for-- on the global economy now. And that’s something they can do.

STEVE LIESMAN: Are you confident Europe will come together and-- and-- and-- I mean, it seems like they’ve been stopping or falling short of making a kind of a big decision that’s needed to solve this problem.

TIM GEITHNER: Well, they’re-- they’re gonna have to do more than what they’ve been doing. I mean, you know, you have these governments in Greece and Ireland and Portugal, Spain doing really, really tough things economically. They’re gonna take years to have-- to work, to have traction over time. It’s gonna take a long time. And Europe is gonna have to do more-- to make sure they have a broader financial backstop in place that allows those reforms to work. And they have not-- I think it’s fair to say they have not been-- effective enough today in providing that kind of reassurance. And they’re gonna have to do that-- gonna have to do a better job of that.

STEVE LIESMAN: Confident they will?

TIM GEITHNER: Well, they’re gonna have to do it. I think-- I don’t think they have a choice in that context.

And I think they recognize they need to do it. If you-- if you look very carefully at what people have done over the last-- even just the last-- seven days, from last Friday to today. I think they’re-- you’re seeing from the leaders of Europe, a recognition that they’ve gotta manage this carefully. And they’ve gotta provide as much reassurance as they can that-- again, these countries that are doing something that’s gonna get support they need.

And Remember to get through these things. For them to work, you have to convince investors around the world, not just Europe, around the world, that they-- should be willing to come maintain their exposure, increase their exposure-- to those countries. And that-- that requires government to-- create a little more confidence.

STEVE LIESMAN: Is it possible Greece could leave the Euro Zone or the Euro Zone itself might fall apart?

TIM GEITHNER: There’s no reason why the world has to live with any material risk of that. Again, that’s something the European leadership is committed to maintaining. There’s no reason why they can’t do that.

STEVE LIESMAN: One of the things that-- that’s helped exports and manufacturing has been a weaker dollar. While you say you’re for a stronger dollar, all of the-- you have to be-- what’s the right way to put it? You have to think it’s been somewhat beneficial that the dollar’s been weak.

TIM GEITHNER: Let me provide a little context to what’s happened to the-- to the major currencies, just over the last two and a half years or three years since the crisis. You know, what you saw is as the world was burning and people were very worried about the potential collapse of the global financial system, you saw the dollar-- rise against really most currencies, really quite substantially.

Which is a sign of fundamental confidence in the-- in the strength of the American economy. And that we would ultimately do the right thing. Which we did. And we restored confidence. And as confidence is returned and growth’s recovered, we saw some of that reverse. We’re taking more risk again. A little less scared and they take more risk. And we saw some of that come off the dollar over time.

STEVE LIESMAN: But every time there’s more concern about Europe or everywhere else?

TIM GEITHNER: You see it happen again. People come back and the dollar rises a little bit. Now, that-- that is-- should be fundamentally encouraging to Americans. Because it means that when people are most worried about the world, about safety, security, they want the safety of the U.S. financial assets. And that’s something we have to make sure we do everything we can to foster and encourage. And that’s why this fiscal agreement is so important.

Our job and the most important thing we can do is to make sure that we’re strengthening the basic fundamentals of the American economy. Demonstrating we’re gonna be careful about how we manage the economy. Fix the challenges we face. And the budget meeting is one-- one part of that.

STEVE LIESMAN: There was-- recently a release of the strategic petroleum reserve. What kind of effect do you imagine it will have on-- on-- on the oil prices and on the economy?

TIM GEITHNER: Well, you-- you saw a very substantial sustained supply disruption. These reserves exist in part to offset those kind of disruptions. And-- very good reason-- and it’s why you saw the world come together and do a coordinated, international release on a pretty significant scale. So, I think it’ll help mitigate those pressures. And-- at the margin, it should help reinforce some of the softness we have seen in oil prices recently which would help

STEVE LIESMAN: Do you-- do you expect—gasoline prices to fall to $3.50 or $3.00? Is there a price that you’re willing to-- that you’re targeting?

TIM GEITHNER: Obviously, they’re gonna come down. And no, you can’t target a price. You know, you can try and soft step some of the-- the supply-- the supply disruption you’re seeing still. And-- that’s what this relief is designed to do.

STEVE LIESMAN: Well, is the United States ready to come back in-- if the 60 million barrels is not-- if that-- if the-- disruption is not restored?

TIM GEITHNER: We think there’s a strong case for doing that. And we’ll talk to our international counterparts and-- we’ll figure out what the sensible thing to do is.

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