WASHINGTON (MNI) – U.S. Treasury Secretary Tim Geithner cautioned
Thursday that the U.S. economy cannot be made safe from financial risk
by separating key banking functions from the banks and the strong
regulation that oversees them.
“When people look back at this crisis, when they look at the
excessive risks taken by large financial institutions, the natural
inclination is to move those risky activities elsewhere. To create
stability, some argue, we should just separate banks from ‘risk,'”
Geithner said in excerpts of his prepared testimony. “But, in important
ways, that is exactly what caused this crisis.
“The lesson of this crisis, and of the parallel financial system,
is that we cannot make the economy safe by taking functions central to
the business of banking, functions necessary to help raise capital for
businesses and help businesses hedge risk, and move them outside banks,
and outside the reach of strong regulation.”
Geithner is due to testify at 9:00 a.m. ET before the Financial
Crisis Inquiry Commission on the causes of the financial crisis and the
case for reform.
** Market News International Washington Bureau: 202-371-2121 **
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