Geithner Says ‘Too Early’ for G-20 to Implement Exit Strategies

By Rebecca Christie

Sept. 3 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner said the Group of 20 nations has been “very successful” in helping to end the global recession and cautioned that it’s too early to remove policies aimed at boosting growth.

“You’re seeing the first signs of positive growth now in this country and countries around the world,” Geithner told reporters in Washington yesterday. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

Geithner spoke as he prepared to leave for a meeting of Group of 20 finance ministers and central bankers Sept. 4-5 in London. The officials are laying the groundwork for a summit meeting later this month in Pittsburgh, where leaders will discuss measures to overhaul supervision of the financial system.

Geithner said talks in London will include the start of a discussion on bank capital standards as well as a “framework” for how the world’s largest industrial and developing economies can cooperate to remove policies to stimulate growth. While it’s “too early” to implement exit strategies, it’s not too soon to talk about them, he said.

The U.S. also wants to discuss how to build a new “international capital accord” to rein in the amount of leverage that financial firms take on, Geithner said. Such an arrangement would set standards for how much capital that financial firms would need to hold in reserve to cushion against potential losses.

‘Timetables’

“We’re going to talk about a framework of design principles, and I think we’re going to start to talk about timetables for what we try to get the world to commit to do in that context,” he said.

International cooperation is needed for any new standards to be effective, Geithner said. He said emerging market nations, many of which already have “pretty conservative” bank supervision in place, will play a bigger role than they have in the past.

“This is not something we can take a long time to do,” he said. “It took the world a very long time to reform the previous system, and that was a consequential and costly failure of cooperation, and we’re not going to repeat that mistake.”

Geithner declined to comment on the recent elections in Japan and said he’s looking forward to working with the new members of the Japanese government.

European finance ministers lined up this week behind proposals to limit bank bonuses as governments sought to forge a common stance on overhauling the financial system before the summit of the Group of 20 nations.

‘Bonus Culture’

“The bonus culture must come to an end,” Swedish Finance Minister Anders Borg, whose nation currently holds the rotating European Union presidency, told reporters yesterday as he arrived for a meeting of EU finance chiefs in Brussels. “The bankers are acting like it’s 1999 and it’s in fact 2009.”

French Finance Minister Christine Lagarde said in Brussels before the meeting that she has “firm proposals to put some order into the system of bonuses.” France will suggest curbing bonus pools as a percentage of a bank’s revenue, imposing a ceiling on payments or taxing them, a Finance Ministry official told reporters earlier this week.

In yesterday’s briefing, Geithner said curtailing executive-compensation is “a critical part of our broader reform agenda.” He said the U.S. has proposed “pretty comprehensive reforms” to give shareholders more control over pay policies and also give managers better incentives to act in the best long-term interests of their banks.

‘Common’ Interests

“If you look at what’s happening across Europe, like in many of these areas, there’s a lot in common in terms of basic strategy,” Geithner said. He declined to comment on specific changes sought by his counterparts, saying he had not yet had detailed discussions on the policy proposals.

Geithner, 48, will be in London the same day the U.S. Labor Department releases its report on the job market in August. A Bloomberg survey of economists shows expectations the unemployment rate rose to 9.5 percent in August from 9.4 percent a month earlier.

A private survey released yesterday showed that companies eliminated more jobs last month than expected, signaling employers have yet to gain confidence a recovery from the deepest recession since the 1930s is taking place. The drop of 298,000 workers followed a revised 360,000 decline in the previous month, according to figures from ADP Employer Services.

It is “very important” to the U.S. to “reinforce the progress we are seeing,” Geithner said.

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net;