Geithner eases some investors’ Europe fears

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U.S. Treasury Secretary Tim Geithner had an interview on CNBC earlier this week that helped inject a little bit of certainty in the market. He spoke about many issues, but it was when he spoke about the European debt problems that stood out in most people’s minds. He said with complete confidence that Europe would not allow any major European bank to go bankrupt like Lehman Brothers did in 2008. This is a big deal because that bank failure was the beginning of the financial crisis.

Tim Geithner has always been very careful about what he says. When he has said something with such certainty in the past, he has been right. The last time he said anything with such certainty was when he said the U.S. would not default on its debt during the debt ceiling negotiations and he ended up being right. He also doesn’t believe the U.S. will go into recession again and blamed a lot of the current economic slow down on external factors like the Arab Spring, the self inflicted debt ceiling debate and the European debt problems.

By him assuring the public that European banks will be saved if they are close to failing, it allows investors to feel a little better about putting their money to work once again. They can now think about taking some risks and looking for value stocks (of which there surely are some in Europe right now). His remarks came after a trip to Europe where he met with his counterparts from the various EU nations. It was clear that this was what they told him and it was also clear that he made sure to let them know what lessons the U.S. learned by allowing Lehman Brothers to fail.

Hopefully more certainty will be injected into the market next week starting with President Obama’s plan for long term debt reduction which he will announce on Monday. This plan will be his vision for what the super committee needs to agree to. It includes his jobs plan that he outlined earlier this month, plus tax reforms and other measures.

More certainty is what the economy needs. It looks like the Obama administration is finally starting to provide some of that.