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CNBC EXCERPTS: CNBC’S STEVE LIESMAN SPEAKS EXCLUSIVELY WITH TREASURY SECRETARY TIMOTHY GEITHNER TODAY ON “SQUAWK BOX”

WHEN: TODAY, MONDAY, JULY 18TH
WHERE: CNBC’S “SQUAWK BOX

Following are excerpts from an unofficial transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Timothy Geithner. All references must be sourced to CNBC.

GEITHNER ON BANK REGULATIONS:

DONT LISTEN TO BANKS ABOUT THIS Q. THEIR INTERESTS ARE NOT ALIGNED PERFECTLY WITHT THE BROAD INTERSTS OF THE AMER ECON. THEIR JOB IS TO EVADE, OR AVOID, OR WEAKEN, ANY CONSTRAINT ON THEIR ABILITY TO OPERATE. OUR JOB TO MAKE SURE WE'RE PROTECTING THE AMERICAN ECONOMY FROM THE RISKS THEY INEVITABLY TAKE. WE'RE GOING TO BE VERY CAREFUL WE GET THESE RULES RIGHT, AND TAKE AS MUCH TIME AS WE NEED TO GET THEM RIGHT.

GEITHNER ON TAKING THE DEFAULT OFF THE TABLE:

I SPENT ALL DAY BOTH DAYS IN THE WHITE HOUSE, AND THERE'S A LOT HAPPENING AS WE TRY TO WORK WITH LEADERS ON BOTH SIDES TO BRING PEOPLE TOGETHER TO DO SOMETHING USEFUL FOR THE ECONOMY, DO SOMETHING ABOUT LONG TERM DEFICITS. VERY IMPORTANT TO HAVE THE LEADERSHIP OF THE REPUBLICAN PARTY DEFINITIVELY TAKES DEFAULT OFF THE TABLE. THAT’S VERY ENCOURAGING.

GEITHNER ON HAVING NO OTHER OPTIONS:

WE'VE LOOKED CAREFULLY AT THIS. WE LOOKED AT ALL THE OTHER CHOICES MY PREDECESSORS FACED, REPUBLICANS, DEMOCRATS, AND WE REACHED THE SAME JUDGMENT THEY REACHED. WE HAVE NO OTHER OPTIONS AVAILABLE TO GIVE CONGRESS MORE TIME. THEY UNDERSTAND THAT. THAT'S WHY YOU'VE SEEN THE LEADERSHIP ON THE REPUBLICAN SIDE ACKNOWLEDGES THEY HAVE TO ACT BEFORE THAT DATE. AND THEY ARE NOT GOING TO PLAY AROUND WITH THIS.

GEITHNER ON THE DEBT:

WE HAVE TO REFINANCE ABOUT $500 BILLION IN DEBT MATURITY IN AUGUST. WE HAVE 87 BILLION IN TREASURY BILLS MATURING ON AUGUST 4TH. WE HAVE TO WRITE 80 MILLION CHECKS A MONTH TO THE AMERICAN PEOPLE, SOCIAL SECURITY BENEFICIARIES, MEDICARE, MEDICAID, VETERAN BENEFITS, AMMUNITION FOR OUR TROOPS FIGHTING WARS OUTSIDE OF THE UNITED STATES.THERE'S NO PLAUSIBLE WAY TO RUN A COUNTRY IN A SITUATION FOR AN EXTENDED PERIOD OF TIME. WE'RE NOT PAYING OUR OBLIGATIONS. IT'S NOT FEASIBLE.

GEITHNER ON THE PLAN FOR THE DEBT LIMIT:

GEITHNER: OUR PLAN HAS BEEN AND THE ONLY PLAN AVAILABLE IS FOR CONGRESS TO ACT. THEY'VE LOOKED AT IT. WE'VE ALL LOOKED AT IT. WE LOOKED TO SEE ALL THE FEASIBLE OPTIONS. THEY RECOGNIZE THAT.

LIESMAN: SO THERE IS NO PLAN? THERE'S NO BACK UP PLAN FOR WHEN THE DEBT CEILING IS RAISED?

GEITHNER: THEIR PLAN AND OUR PLAN IS FOR CONGRESS TO RAISE THE DEBT LIMIT. YOU SHOULD FOCUS ON THE MORE CONSEQUENTIAL LONG TERM QUESTION WHICH IS HOW TO GET BOTH SIDES TOGETHER AND DO SOMETHING USEFUL FOR THE ECONOMY AND USEFUL FOR THE LONG TERM FISCAL POSITION. AND THAT’S WHAT WE'RE SPENDING SO MUCH TIME WORKING ON NOW.

GEITHNER ON DEFICIT REDUCTION:

WE NEED TO HAVE A BALANCED PACKAGE. EVERYBODY Whose LOOKED AT THIS REALIZES YOU NEED A BALANCED PACKAGE. THERE'S BEEN NO DEFICIT REDUCTION DEAL IN AMERICAN HISTORY THAT DIDN'T HAVE A BALANCED PACKAGE WITH SOME REVENUES AS PART OF THE DEAL.

GEITHNER ON MODEST TAX REFORM:

WE WON'T DISMANTLE MEDICARE AND SOCIAL SECURITY. WE WON'T PUT HUGE ADDITIONAL BURDENS ON THE ELDERLY AND THE POOR. WE'RE NOT TALKING ABOUT THINGS THAT WOULD TOUCH THE TAX BURDEN OF THE VAST MAJORITY OF WORKING FAMILIES ACROSS THE COUNTRY. BUT, TO DO THIS, YOU'RE GOING TO HAVE TO HAVE COMPREHENSIVE SAVINGS ACROSS THE GOVERNMENT AND YOU HAVE TO DO SOME MODEST REFORMS IN THE TAX SYSTEM SO WE HAVE A FAIRER BURDEN OF FINANCING THE GOVERNMENT.

GEITHNER ON EUROPE:

WHAT EUROPE OBVIOUSLY NEEDS TO DO IS TO ACT MORE FORCEFULLY TO CONTAIN THE RISK OF AN ESCALATING CRISIS. THEY HAVE THE CAPACITY TO MANAGE THIS. OF COURSE WE WANT THEM TO DO THAT. IT'S IN THEIR INTEREST NOT JUST OUR INTEREST. THEY'VE TAKEN A NUMBER OF STEPS THE LAST FEW WEEKS IN THAT DIRECTION.

GEITHNER ON A DEFAULT BEING CATASTROPHIC:

IF THE UNITED STATES OF AMERICA WERE TO DEFAULT, IT WOULD BE CATASTROPHIC FOR THE AMERICAN ECONOMY, FOR THE AMERICAN FINANCIAL SYSTEM FOR THE AVERAGE AMERICAN PEOPLE. IT WOULD BE A SUBSTANTIAL, UNFAIR TAX ON ALL AMERICANS, AND IT WOULD BRING THE WORLD ECONOMY, AGAIN, BECAUSE OF THE CRITICAL ROLE WE PLAY IN THE WORLD ECONOMY TO THE EDGE OF RECESSION AGAIN.

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