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CNBC TRANSCRIPT: CNBC'S MARTIN SOONG SITS DOWN WITH TREASURY SECRETARY TIMOTHY GEITHNER TODAY

Treasury Secretary Timothy Geithner
cnbc.com
Treasury Secretary Timothy Geithner

WHEN: TODAY, THURSDAY, NOVEMBER 12TH

WHERE: CNBC'S BUSINESS DAY PROGRAMMING

Following is the unofficial transcript of a CNBC interview with Treasury Secretary Timothy Geithner today, Thursday, November 12th. Excerpts of the interview will run throughout CNBC's Business Day programming beginning with CNBC's "Worldwide Exchange."

All references must be sourced to CNBC.

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SOONG: Just as you were arriving in Tokyo and just days ahead of the President's arrival out here in Asia we get the People Central Bank of China PBOC coming out with report, with strongest hint yet that they're ready after 18 month hiatus to maybe let the Renmimbi appreciate. Markets if you look at non-deliverable forwards they're pricing in 12-months out about a 3% appreciation. Let me get your reaction to that, I mean the timing is great is it necessarily good news, is that enough would that be enough for Washington?

GEITHNER: What I focus on is this. You saw in this meeting, heard just a few minutes ago and you saw in the statement released in this meeting very strong consensus about the importance of the regions, the global economy, moving over time to more flexible market oriented exchange rates. I think you've seen that in the broad statement of the Chinese leaders. I think it's important for China, important for the region, important for the world economy. And it's gonna be important, it's important part but it's not the only thing it's important part of this broad effort you're hearing everyone commit to. They're trying to lay foundation for a more balanced global recovery. So as recovery comes back, as growth strengthens we want to make sure it's on a stronger foundation.

SOONG: OK, so part of the menu as it were. Let me ask you directly because at meetings like this it's always the case ministers talk to the press and you know there's a lot of chatter about. But apparently the talk is you made 2 points to the ministers either at your bilaterals or for the together sessions and one is if you're looking for free float of renmimbi, don't hold your breath, one. And two a weaker dollar is something that you're just going to have to get used to. True or false? Can you confirm?

GEITHNER: Neither statement is true. In fact I think it's important to recognize you're seeing very encouraging early foundations of stability in the global financial system. Not just in growth coming back but you're seeing Americans start to save more. You're seeing our current account imbalance come down, we're borrowing much less from the rest of the world. You see much greater confidence in the basic stability of our financial system. And I think very broad confidence in our commitment, commitment to the President as growth recovers that we're gonna bring our fiscal position back to a sustainable balance, sustainable position. That's very important in the United States we recognize it's important to the world and again I think if you look at the progress we've achieved you're seeing very good initial foundation laid for a period of stronger growth and for stability, financial stability globally.

SOONG: Back to the whole currency issue though, you've been in the Journal and quoted staying strong dollar, repeating that mantra. Thing is though the past 4 Treasury Secretaries have said essentially the same thing, a strong dollar is in the U.S. interest and it's good for U.S. economic health. (Geithner interrupts) But since then, dollar has fallen

GEITHNER: United States of America is to be a source of stability to the global economy and we're committed to working with countries around the world to make sure that we have a recovery in place, we have a more stable financial system, we have a more balanced pattern of growth globally. It's important to the United States, we're committed to that. Strong dollar is part of that commitment. But you're also seeing a very important part of recovery here which is a consensus emerging on the need for a broader shift in policy, broader reforms here and around the world towards growth led by domestic demand, shift towards more market oriented, more flexible exchanges over time.

SOONG: I'm pretty sure I'm not going get much out of you on this but I'm obliged to try. And that is the value of the dollar right now. About 1.50 Euro dollar round about 90 dollar yen is that fair according to fundamentals, especially U.S. economic fundamentals. Is that fair value?

GEITHNER: I don't ever talk about developments in markets and I never will. You don't want somebody in my job doing that. But I think what's important to recognize is the broad thing you've seen in markets over the last 9 months which you saw, the world it was facing real risk of depression, real risk of deflation, real risk of catastrophic financial collapse. A set of broad concerns that caught a big rush into U.S. financial assets. You're seeing as confidence returns, investors savers, around the world starting to take risk again. That's a fundamentally healthy thing. It's encouraging, it's very early still and as you saw here and in the G20 very strong commitment around the world to try and make sure we're reinforcing recovery, putting in place the kind of reforms that will make recovery more sustainable growth stronger in the future. But again I think we're making some progress it's a good beginning.

SOONG: You raised the issue of risk. Where the banks are concerned the big U.S. names that were bailed out by the government, Goldman, JP, Morgan, etc. They're back there making money and minting it as well. Bonuses are being paid out, big time as well. In London not too long ago Lord Blankfein comes out in an interview and when asked you know how do you feel about making money, to be richer than God? And he says look I am doing God's work. Very in politic, but I mean that's his business. But does it cast a bit of a negative shadow on what the government has done to help get Goldman back to that sort of position?

GEITHNER: What we're gonna do is we're going to make sure we put in place comprehensive fundamental reform of our financial system so you don't see a repeat of the kind of excessive risk taking that led to this crisis cause so much damage to economic activity in the United States and around the world. That's gonna take fundamental reform, it's gonna take comprehensive legislation where you're seeing a lot of progress in the Congress build consensus on that and we're leading a global effort to try and make sure that as we strengthen standards in the United States we're putting in place stronger standards, stronger rules of the road, stronger protections in place internationally because we need a lot of playing field this is going to work we gotta do it in a global basis, these markets are global. And we're very committed to that.

SOONG: If we can talk about the issue of the deficits, one of the reasons why a lot of people think there is structural pressure behind the dollar. You've been quoted time and again consistently saying at these levels not consistent and we will do something about it but you're not in a position at a point in time where you can articulate exactly how you're going to bring those deficits down.

GEITHNER: I think this is an important thing and you're right to emphasize the importance of this stuff. In February of this year, in the President's initial budget he made it clear that as growth strengthens we need to bring our budget deficits down to a sustainable level. For the United States given the structure of the economy roughly the level of 3% of GDP over the medium term. That's something we can achieve. That's a manageable challenge for us. And as growth recovers and as the temporary support for the economy we had to put in place to solve the crisis, as that winds down then we'll be able to start to put our fiscal position on a path to a more sustainable position. That's important for the United States, important for global financial stability. Recovery is not going to be strong enough unless people are confidence, confident in that. And I think you can see again if you look at broad behaviour over the last several months you see a lot of confidence in basic fundamental stability of the U.S. financial system and a lot of confidence in the quality of our financial stewardship.

SOONG: All right. Using prop (PH) money, some of it, is that part or is that a way to bring the deficit down? And-- and how far-- are you-- in terms of-- sinking (?)? 210 plus 70 returned by banks. Another 50 likely to come in. How much of that could go towards reducing the deficit?

GEITHNER: We are likely to have to borrow substantially less than we initially anticipated to help repair the damage to our financial system. You've seen capital start to come back to the government. Banks are repaying with interest. We're likely to see significant repayments ahead.

That's gonna allow us to devote greater resources to debt reduction. That's a fundamentally good thing. It-- it justifies the basic judgment the President made, which is to make sure that we act aggressively early to bring capital into the financial system. To bring a basic foundation of stability. To try to repair the basic damage to the basic credit pipes of our economy.

And we're-- we made a lot of progress in that direction. Now we still see a lot of-- credit is very tight for lots of businesses, particularly small businesses in the United States. So we're gonna continue to try to have to work to make sure credit's available to support this recovery, strengthen this recovery. That's gonna take more work over time.

But as you said, you're seeing money come back into the treasury. Banks repaying with interest. You're gonna see more of that ahead. Private capital's more valuable than public capital to a private institution. And we're gonna continue to work to make sure we're fixing this problem, repairing our financial system at least cost to the American taxpayer.

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