By Brai Odion-Esene

WASHINGTON (MNI) – U.S. Treasury Secretary Timothy Geithner
Thursday said there is a very strong and compelling case for the action
taken Wednesday by the Federal Reserve along with other major central
banks, saying it would ease the pressure on struggling European banks to
undergo a level of deleveraging that would hurt growth.

Speaking to reporters at a press conference intended to focus on
the still-leaderless Consumer Protection Bureau, Geithner was asked if
Wednesday’s coordinated action by central banks from the developed world
would buy under-pressure European authorities more time.

“I, like I said yesterday, very much welcome and support the action
… . I think this was a responsible, sensible way for the Federal
Reserve and central banks to try and diminish some of the pressures you
are seeing on European financial institutions,” he replied.

“That is in our interest to do,” Geithner added, “because we can be
successful in reducing the need those institutions face now to delever
(to ease funding pressures).”

This in turn would ease the pressure on growth in emerging markets
and elsewhere that would normally result from this deleveraging, he
said.

The Federal Reserve and five other major central banks Wednesday
announced precautionary measures to better supply the world with dollars
and the Fed said it also has “a range of tools” to amplify liquidity for
U.S. financial institutions if necessary.

The Fed said the European Central Bank, and the central banks of
Japan, England, Canada and Switzerland will pay 50 basis points less if
they conduct dollar liquidity swaps, so the new rate will be the
overnight index swap (OIS) rate plus 50 basis points.

The Fed said the six central banks, “as a contingency measure” have
also agreed “to establish temporary bilateral liquidity swap
arrangements so that liquidity can be provided in each jurisdiction in
any of their currencies should market conditions so warrant.”

On the CFPB, Geithner said the administration is taking the issue
of consumer protection very seriously. The confirmation of Richard
Cordray as director of the agency has been held up in the Senate, and
the Treasury Secretary warned that without a confirmed head “the reach
of the bureau is limited.”

“The protections it puts in place, will only be really enforceable
against banks,” he warned, leaving out a wide range of other
institutions hat also provide financial services and credit to
individuals — such as payday lenders, consumer finance providers and
debt collectors.

Republicans have said they would prefer the CFPB to be governed by
a commission rather than a single director, but Geithner made clear the
administration will not entertain that option.

The checks and balances crafted for the agency during the writing
of the Dodd-Frank Act are very strong, Geithner said, “and we don’t see
any case for changing that balance and I don’t believe we should have to
do that.”

Geithner also said it makes no sense to have a system with dual
standards for consumer protection: a higher standard for those
conducting business with banks on the one hand, and then much weaker
protections and enforcement on the other for those doing business with
non-bank entities.

He urged Congress to act soon on Cordray’s confirmation, describing
him as a “tough and fair” enforcer.

“The longer we wait to confirm a director, the more we’re leaving
the millions of Americans who aren’t doing business with banks
vulnerable to the kind of predation, abuse that caused so damage during
the crisis,” he said.

To lawmakers that believe dragging out the Cordray’s confirmation
is needed to protect the banking sector, Geithner argued that there is
no benefit to banks. They will have to comply with stronger standards,
he said, while the non-bank entities that compete with them face less
stringent oversight.

“They should be able to compete with banks, but not with lower
standards for the protection of consumers,” Geithner said.

** Market News International Washington Bureau: 202-371-2121 **

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