Geithner Says Obama Opposes Depriving Fed of Employment Mandate

November 22, 2010

By Ian Katz -Bloomberg

U.S. Treasury Secretary Timothy F. Geithner said the Obama administration would oppose any effort to strip the Federal Reserve of its mandate to pursue full employment and warned Republicans against politicizing the central bank.

“It is very important to keep politics out of monetary policy,” Geithner said in an interview airing on Bloomberg Television’s “Political Capital with Al Hunt” this weekend. “You want to be very careful not to take steps that hurt our credibility.”

The Republican congressional leadership, including John Boehner, nominated as the next House speaker, has criticized the Fed’s plan to buy $600 billion in assets, saying it would fuel inflation and asset bubbles. Senator Bob Corker, a Tennessee Republican who serves on the Banking Committee, said he favors confining the Fed’s mandate to promoting price stability.

Geithner, 49, declined to say what compromise the Obama administration would be willing to consider on extending Bush- era tax cuts, while ruling out making permanent the reductions for the wealthiest Americans.

“It is not responsible, and I could not recommend to the president in good conscience, that we go out and borrow $700 billion to make those high-end tax cuts permanent,” Geithner said.

He said he doesn’t think the tax cuts for the middle class will be allowed to expire in December, or that all of the tax cuts, including those for the wealthy, will be extended permanently.

General Motors

On General Motors Co., Geithner said the government would get back “a very substantial part” of its investment and all the money the Obama administration spent on bailing out the automaker. Taxpayers put about $13.4 billion into GM under former President George W. Bushand $36.1 billion under Obama.

GM, which went bankrupt last year after almost a century on the New York Stock Exchange, raised more than $20 billion in an initial public offering Nov. 18.

Asked about Europe, Geithner said a financial rescue of Ireland could mark an end to the continent’s sovereign debt crisis. Officials from the European Union, International Monetary Fund and European Central Bank spent a second day in Dublin yesterday discussing a possible bailout of Irish banks.

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