For the past two years, Treasury Secretary Timothy Geithner has had to battle a financial crisis, a recession and questions about his own personal role as the crisis unfolded. Now he enters a new phase likely to be dominated by international challenges, as well as a tough political climate at home in which he has to drive the administration's effort to achieve budget stability.
Mr. Geithner spoke to The Wall Street Journal's Gerard Baker about a number of these hot-button topics, including China's currency, U.S. tax policy and the administration's desire to smooth relations with the business community.
Here are edited excerpts of that conversation.
GERARD BAKER: Larry Summers last night said that the most important thing that history would record when it looks back in 50 or 100 years will be how the U.S. handled the emergence of this extraordinary new economic power, China.
You've spent a lot of time dealing with exactly that issue, particularly with the currency issue. China has, as we know, been reluctant to revalue its currency. You've just come back from important meetings in Asia.
TIMOTHY GEITHNER: China is letting its currency rise. It's moving very gradually. They are very averse to a precipitous large move, which I understand. But they're letting it rise because if they don't let it rise, then all that fundamental economic pressure is going to end up in inflation or it's going to end up in asset price bubbles -- things that could threaten their capacity to grow in the future.
They're having a big debate in China about how fast they should let it rise. And you're going to see that debate play out over time.
MR. BAKER: Most economists would say that the currency is at least 10% to 20% undervalued. Is China actually going to let the currency go to a level that seems more appropriate?
MR. GEITHNER: I think they will. I think they have to. The question is how it happens.
It's either going to happen through inflation or it's going to happen through inflation pushing up the real value of the currency or it's going to happen by letting the nominal exchange rate move.
MR. BAKER: The U.S. has been criticized very heavily in the last few weeks. The Germans have complained about quantitative easing. They've complained about U.S. economic policies. The Chinese have, too. Has the U.S. in these international debates lost some of its moral authority?
MR. GEITHNER: I think it's important to recognize as an American that the crisis caused a huge amount of damage to our credibility. People looked at the United States slip into crisis, and they thought, have we lost the capacity to manage our financial affairs prudently? And it's going to take us a while to dig out of that loss of credibility. And that's probably why we've worked so hard and so quickly to make sure that we were addressing the biggest weaknesses in our financial system, so that our financial system was no longer a source of risk and threat to the global financial stability.
And it's why it's so important that we keep working very hard to make sure we're not just digging out of this hole much more quickly, but that we start to address our long-term fiscal challenges.
MR. BAKER: Don't the critics have a point that the U.S. is basically doing the same -- devaluing its currency -- in just the same way that the Chinese are?
MR. GEITHNER: You're trying to get me to speak about monetary policy, which I won't do.
Ralph Alswang for The Wall Street Journal美国财政部长盖特纳盖特纳：中国正在让人民币升值，升值步伐非常缓慢。他们很不乐意让人民币大幅升值，这我可以理解。但他们还是在让人民币升值，因为如果不这么做，所有经济基本面的压力最终都会化为通货膨胀或资产泡沫，从而可能影响中国未来的经济增长能力。