The Tim Geithner mantra: Be cautious

The Treasury Secretary actually uttered the words "be cautious" while discussing his approach to interpreting economic and financial data, but it also seems to be something of a personal credo. In a half-hour long chat this morning with my boss, Rick Stengel, as part of something called Conversations on the Circle (the circle being Columbus Circle, where Time Warner's HQ is located), Geithner went out of his way to avoid making any news. (Here's a 5-minute video excerpt of the conversation.) This was partly because his boss, Barack Obama, is planning to unveil the Administration's financial regulation reform plan on Wednesday, and Geithner didn't want to upstage him. But it's also the way Geithner has decided to craft his public persona at Treasury—by following the example of his mentor Robert Rubin and generally divulging almost nothing at all.

I had urged Stengel to see if he could get a reaction out of Geithner to the suggestion that we might need a value-added tax to shrink the deficit while expanding health care to all. So Stengel asked him if we'd need a VAT to finance health care reform.

Geithner: Not in that context.

Stengel: Is there another context?

Geithner: I didn't mean to encourage you in that direction.

Geithner did say that he thinks Americans are headed for a more frugal, less-indebted future—and maybe even a less-materialistic one. "People are going to be more focused on what they do rather than what they earn," he said.

As far as the banking system goes, "we want to have a more boring system," Geithner said. When Stengel asked him about the huge market share now held by the top four banks, Geithner brought up the 8,000 to 9,000 other banks and said "I don't think we want to end up with a more concentrated system than we have today." Which is a lot different from saying we want to end up with a significantly less concentrated system.

When Stengel asked Geithner if the various toxic-asset-purchasing programs unveiled with great fanfare a few months ago were dead, Geithner said "no," but immediately allowed that they didn't seem quite as crucial as they once did. "Banks were able to raise capital much more easily than we thought they'd be able to," he said. "If the world gets progressively better, you may see less demand for these facilities."

Finally, on the future of banking regulation: "We're not going to go back to where it was. We can't," he said. "The only path to a more stable system is more capital in the system and greater constraints on risk-taking, more evenly applied."