Wall Street got an earful Monday from Treasury Secretary Timothy Geithner during a speech at New York University’s Stern School of Business. In remarks that both criticized and encouraged those in attendance, the secretary defended the administration’s recent financial reform bill, and explained the industry’s responsibilities in the wake of it passage.
“We had an obligation to rebuild our financial system so it could, once again, be an engine for economic growth and innovation,” Geithner said, according to text of the speech provided by the Treasury Department. “The reforms that are now the law of the land will help us rebuild a pro-growth, pro-investment financial system. We will move as quickly as possible to bring clarity to the new rules of finance. The rule writing process traditionally has moved at a frustrating, glacial pace. We must change that.”
He went on to say that the new rules will not be layered on top of old, outdated ones, calling such layers of rules “overwhelming.” As a result, alongside efforts to strengthen and improve protections for the economy, he said his department and regulators will eliminate rules that did not work, and streamline and simplify whenever possible.
“We will not risk killing the freedom for innovation that is necessary for economic growth. Our system allowed too much freedom for predation, abuse and excess risk, but as we put in place rules to correct for those mistakes, we have to strive to achieve a careful balance and safeguard the freedom, competition and innovation that are essential for growth. For the financial industry, your core challenge is to restore the trust and confidence of the American people and your customers and investors around the world.”
He closed by offering specific instructions for industry executives, imploring them to not wait for Washington to draft rules before changing how they do business. Among them:
- “Find new ways to improve disclosure for your consumers. End hidden fees. Don’t push people into loans they can’t afford.”
- “Demonstrate to your business customers – small and large – that after running for cover during the peak of the crisis you are ready and willing to take a chance on them again.”
- “Change how you pay your executives so you are not rewarding them for taking risks that could threaten the stability of the financial system.”
- “Make sure you have board members who understand your business and the risks you are taking.”
- “And, focus on improving your financial position so that your financial ratings, your cost of capital, the amount you have to pay to borrow, all reflect your own financial strength and earnings prospects, not the false expectation that the government will be there in the future to rescue you.”
Washington Bureau Chief Melanie Waddell contributed to this article.