Traveling Geithner displays optimism

Jul 14, 2009 (The Washington Times - McClatchy-Tribune Information Services via COMTEX) -- Treasury Secretary Timothy F. Geithner is using a trip to Europe and the Middle East this week to shore up confidence in the U.S. economy and the dollar, though he warned Monday the struggle against the global recession is far from over.

"In my view, there are still significant risks and challenges ahead," Mr. Geithner said at a news conference in London after talks with British policymakers, including Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling. "We have done a great deal domestically ... but there is a lot of uncertainty."

Mr. Darling agreed "there's a lot of uncertainty in the world" regarding the state of the global economy.

But Mr. Geithner and British officials said that the United States and its economic partners have responded well to the financial crisis that nearly crippled world markets last fall.

"I think we have remarkably strong consensus in place on core elements," Mr. Geithner said.

Mr. Darling predicted "there is a very good chance" that the United States and world economies will recover and have sustained growth during the next few quarters.

"We are making progress, we are coming through," he said.

Mr. Geithner traveled to Saudi Arabia on Monday and later this week will visit the United Arab Emirates in an attempt to reassure the Persian Gulf state leaders that the U.S. dollar assets they hold in large quantities remain a sound investment. The two nations are the Arab world's two largest economies.

Mr. Geithner also will meet with French officials in Paris later this week before returning home.

There has been increasing talk in recent days that the dollar's long hegemony as the world's reserve currency could be under threat, with officials in China and Russia among those hinting that a new reserve currency should be considered.

But Mr. Geithner told CNN in an interview broadcast Sunday that the U.S. dollar's role as the world's reserve currency is not likely to weaken because global investors will continue to use it as a safe haven.

"When people are most concerned about risk, generally they want to be investing in the most liquid and safest markets in the world, which is still the market for our Treasury bills," Mr. Geithner said. "We want to be sure we can maintain that basic response."

The secretary on Monday addressed concerns on Wall Street that the federal government so far has ignored pleas for financial aid from CIT Group, a New York-based lender that is facing a possible financial collapse.

CIT's bond and share values have tumbled in recent days out of concern that the Federal Deposit Insurance Corp. has not allowed the lender to participate in its bond-guarantee program created last year to unfreeze debt markets.

"I'm actually pretty confident [that] in that context, we have the authority and the ability to make sensible choices," he said. "We have a significant interest generally in trying to make sure the financial system gets through this [crisis], adjusts where it needs to adjust and emerges stronger.

But Mr. Geithner declined to say if CIT will receive any additional money from the $700 billion Troubled Asset Relief Program.

"Obviously, in that case, as always, we're watching closely developments in those markets," he said.

Following Mr. Geithner's meeting in London, the British Treasury announced it will host a two-day meeting of finance ministers and central bankers of the Group of 20 nations in London starting Sept. 4.

The gathering will precede a late September meeting Mr. Obama will host in Pittsburgh of the G-20 leaders. The G-20 includes the Group of Eight industrialized nations -- the United States, Japan, Germany, France, the United Kingdom, Italy, Russia and Canada -- plus the European Union and the world's major developing economies.