U.S. Treasury Secretary Timothy Geithner on Monday promised not to swamp Wall Street with red tape and vowed to move quickly to put in place new rules for the financial marketplace to dispel uncertainty.
In return, he urged big banks to step up and make loans more readily available to businesses.
Amid rising doubt about the U.S. recovery’s durability and Washington’s economic stewardship, Geithner traveled to New York to meet Mayor Michael Bloomberg and captains of industry to calm fears that new rules will crimp their competitiveness.
Speaking at New York University, he said the administration will streamline regulation and not simply “layer new rules on top of old”.
“We will move as quickly as possible to bring clarity to the new rules of finance,” Geithner said. “We will not risk killing the freedom for innovation that is necessary for economic growth.”
But he said financial firms have a responsibility too and need to work to regain frayed trust.
“Demonstrate to your business customers — large and small — that after running for cover during the peak of the crisis you are ready and willing to take a chance on them again,” he said.
President Barack Obama signed a 2,300-page package of financial regulatory reforms into law last month but it is largely a work in progress since rules to implement it still need to be drawn up.
The sweeping reforms, fought bitterly by banks, were prompted by lawmakers’ anger at Wall Street’s role in precipitating the 2007-2009 financial crisis.
HURRY TO TAMP DOWN UNCERTAINTY
Treasury is on a drive this week to sell the financial reform package, sending out top officials to beat the drum for the benefits that heightened consumer protection will bring.
With the political season ahead of November congressional elections heating up, Republicans have argued a cloud of regulatory uncertainty is causing businesses to delay hiring and making a bad economic situation worse.
A Reuters-Ipsos poll last week pointed to trouble for Democrats in the Nov. 2 elections. It showed a majority of Americans think the Obama administration has not focused enough on job creation. The U.S. unemployment rate stood at a lofty 9.5 percent in June.
Geithner said Treasury will try to speed up the rule-making process. That would reduce the period of uncertainty for banks and other businesses but it would also mean lobbyists for the financial industry would have less time to influence the rules. “The rule-writing process traditionally has moved at a frustrating, glacial pace,” he said. “We must change that.”
Geithner extended an olive branch to Wall Street banks, saying it was necessary to balance needed protections for consumers against businesses’ drive to create new products and boost profits.
RULES HAD TO CHANGE
“Our system allowed too much freedom for predation, abuse and excess risk, but as we put in place rules to correct for those mistakes, we have to strive to achieve a careful balance and safeguard the freedom, competition and innovation that are essential for growth,” he said.
He suggested there could be benefits for business by eliminating some old rules, though he didn’t publicly specify which ones.
“Alongside our efforts to strengthen and improve protections for the economy, we will eliminate rules that did not work. Wherever possible, we will streamline and simplify,” he said.
Geithner met privately with executives from the finance industry, the retail sector and real estate ahead of his New York University address. Among those invited to the lunch were Laurence Fink of BlackRock, Donald Marron of LightYear Capital, Eric Mindich of Eton Park Financial Management and James Tisch of Loews Corp.
