Treasury Secretary Timothy Geithner said Thursday it's "deeply unfair" that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
WASHINGTON -- Treasury Secretary Timothy Geithner said Thursday it's "deeply unfair" that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
He acknowledged public outrage over that and said people watched with disdain as Washington protected the banks and investment houses whose risky bets caused the crisis, even as the national unemployment rate was soaring to double-digit levels for the first time in a generation.
But in a nationally broadcast interview, Geithner also argued that President Barack Obama had no choice when facing a financial crisis but to support then-President George W. Bush's "unpopular" bailout plan.
Geithner said the other option was to "stand back" and do nothing, "and that would have been calamitous for the American economy."
Geithner was president of the Federal Reserve Bank of New York at the peak of the crisis. The New York Fed managed bailouts including the $182 billion rescue of insurance giant American International Group Inc.
The near-failure of AIG and the failure of investment bank Lehman Bros. in September 2008 sparked a credit crisis throughout the financial system. As investments lost value and more borrowers defaulted, banks did not know which potential borrowers were safe bets. Lending ground to a halt.
The government responded with a sweeping effort to get credit flowing again. The centerpiece was the $700 billion bailout known as the Troubled Asset Relief Program. Billions of dollars were injected into the biggest banks to shore up their balance sheets and restore confidence to the markets.
Programs to help homeowners and support small business lending were announced months later, after Obama took office in January 2009. By then, unemployment had ballooned and the economy was in a deep recession.
Geithner said in Thursday's interview that administration officials are "very worried" about recovering the more than 8 million jobs lost in the recession. He said the unemployment rate of 9.7 percent is "unacceptably high."
He said that economic recovery will take "a long time," despite signs of improvement in the manufacturing sector and other bright spots.
Separately Thursday, an annual survey of top-earning hedge fund managers highlighted the distance between financial executives and the millions of Americans facing from job loss and other economic hardships.
The 25 highest-paid hedge fund managers earned a total of more than $25 billion in 2009, according to Absolute Return + Alpha magazine. That's more than the $22.3 billion they earned in 2007 when the economy was still booming, and more than double the $11.6 billion they earned in 2008.
Appaloosa Management's David Tepper topped the list, earning $4 billion. Nine hedge fund managers made more than $1 billion.
More than 11 million people now are drawing unemployment insurance benefits, and the overall jobless rate of 9.7 percent understates the true level of economic misery because many people who give up looking for work are no longer in the official count of the unemployed. The Bureau of Labor Statistics on Friday will release a report on conditions in the labor markets in March.
A report Thursday said that initial claims for unemployment benefits fell slightly last week as the recovering economy moves closer to generating more jobs. The Labor Department said new jobless benefit claims dropped 6,000 to a seasonally adjusted 439,000, nearly matching analysts' estimates. It's the fourth drop in five weeks.
Geithner said he hopes skeptical voters will note legislation moving through Congress to bring reforms to the financial system.
"What happened in our country should never happen again," he said. "People were paid for taking enormous risks. It was a crazy way to run a financial system." Geithner said, "It's the government's job ... to do a better job of restraining that kind of risk-taking."
The Geithner interview was broadcast Thursday on NBC's "Today" show.