Geithner: Europe threatens U.S. economy

@CNNMoney July 25, 2012: 10:01 AM ET
Treasury Secretary Tim Geithner warns that the European debt crisis threatens the U.S. economy.

Treasury Secretary Tim Geithner warns that the European debt crisis threatens the U.S. economy.

WASHINGTON (CNNMoney) -- The biggest threat to the U.S. economy is Europe, Treasury Secretary Tim Geithner said Wednesday.

"The economic recession in Europe is hurting economic growth around the world, and the ongoing financial stress is causing a general tightening of financial conditions, exacerbating the global slowdown," Geithner said in testimony before the House Financial Services Committee.

Geithner's testimony comes as part of his role as chief of a regulatory group called the Financial Stability Oversight Council.

Geithner touted that four years after the financial crisis the system is "stronger and more resilient." He said that banks now hold far more capital in reserves than they used to.

And the size of the "shadow banking system," or financial contracts called derivatives, that remains unregulated has shrunk since the crisis, Geithner said.

But the European debt crisis remains a substantial threat to U.S. and worldwide growth, according to the Treasury chief.

"A severe crisis in Europe would necessarily have very substantial, adverse effects on the United States," Geithner said.

Geithner said that the U.S. economy has also been hurt by the rise in oil prices earlier this year, cuts to government spending and slow rates of income growth. He warned that economic growth could be curtailed more by approaching tax increases and spending cuts, and uncertainty about what Congress will do as the so-called fiscal cliff approaches.

"These potential threats underscore the need for continued progress in repairing the remaining damage from the financial crisis and enacting reforms to make the system stronger for the long run," Geithner said.

During the hearing, Geithner is expected to be asked about his role running the New York Federal Reserve, which is embroiled in the scandal over rigging of a key financial benchmark that impacts interest rates for mortgages, loans and derivative contracts worldwide.

While Geithner was in charge of the New York Fed, the agency got early warning signals that the British bank Barclays was fixing the Libor rate.

Geithner didn't mention the Libor scandal in his opening statement. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.