U.S. Treasury Secretary Visits SF

U.S. Treasury Secretary Timothy Geithner stopped by San Francisco today to discuss the country's economic relationship with China

U.S. Treasury Secretary Timothy Geithner stopped by San Francisco  today to discuss the country's economic relationship with China just a week  before he heads to Beijing for a strategic talk on national and global fiscal  issues.

    Geithner addressed a crowd of more than 400 in the Peacock Court  of the InterContinental Mark Hopkins hotel at the top of Nob Hill around 1  p.m. before he answered a slew of questions from Commonwealth Club forum  moderator and Fortune magazine senior editor-at-large Adam Lashinsky.

    In a prepared speech Geithner emphasized that solutions to  economic problems in the U.S. are connected to China and other global markets  but are "the result of the choices we make in the United States -- not the  choices of others."

    He added that prosperity in America depends on our homegrown  economic policies even as we encourage further reforms in China.

    He outlined two objectives in working with the Asian nation -- the  first an increase of U.S.-based companies exporting and selling to China and  a move in China away from an export-oriented growth model.

    A second objective focused on cooperating with China on  international economic and financial issues, essentially creating a united  front on issues such as the global financial crisis in 2008 or the ongoing  financial crisis in Europe.

    Geithner noted China's recent economic reforms including cuts to  some Chinese tariffs in 2012 and a pilot program launched to reduce taxes on  services. He cited a less than 3 percent Chinese trade surplus last year,  compared to around 8 percent when Obama first entered office.

    While Geithner said recent changes to China's exchange rate system  were welcome, he added that more change is necessary and the Chinese currency  needs to appreciate further.

    Geithner remarked that the Chinese financial system's biggest  challenge is the dominance of state-owned banks which he said favor lending  to large state enterprises, depriving money to other sectors, among other  problems.

    "If China's state enterprises want to be treated like commercial  enterprises by the rest of the world, they need to act more like commercial  enterprises," he said.

    To emphasize the need for further reform, he compared Shanghai to  San Francisco when he said consumer products in the Chinese city can cost  twice as much as those in the Bay Area.

    He also mentioned his upcoming trip to Beijing with Secretary of  State Hillary Rodham Clinton for a fourth meeting of the U.S.-China Strategic  and Economic Dialogue.

    The third meeting was held in Washington, D.C., last May.

    The dialogue is an initiative created by President Obama and  Chinese President Hu Jintao in 2009 to strengthen the relationship between  the two nations, according to the Department of the Treasury.

    After his remarks, the forum transitioned to a conversation with  Lashinsky when a woman jumped from her seat near the front of the room and  held above her head a hot pink sign while screaming, "Banks got bailed out,  people got sold out."

    She was escorted out of the room by two of the many security  personnel lining the walls while loudly asking, "Secretary Geithner, what are  you going to do about the people?"

    Lashinsky used the interruption to ask his first series of  questions, reframing the question about the bank bailouts and American  Recovery and Reinvestment Act of 2009.

    Geithner acknowledged the polarizing decision to support the  country's banks at the start of the recession; however, he defended Obama's  choice.

    "We have to do things that are difficult," he said. "We didn't do  it for the banks, we did for the economy."

    He repeated throughout the discussion that the current  administration has been tough on the financial system.

    "The reforms are very tough and they will endure," he stressed  when asked if another financial crisis was on the horizon.

    For the remainder of Geithner's time on stage, questions written  by members of the audience structured the conversation between the economic  journalist and the country's 75th treasury secretary.

    After a question about the future of American manufacturing,  Geithner reflected on his visit to industrial steel company, Oregon Iron  Works, near Portland, Ore., on Wednesday and said we have not lost the  ability to build things on American soil.

    A serious, though slightly humorous, question about his first few  days as treasury secretary in the face of a global financial breakdown in  early 2009 prompted Geithner to say it was a "dark and scary" time.

    Despite the crumbling financial environment at the start of  Obama's term, Geithner praised Obama, "He did the hard things early on."

    The conversation ended with the treasury secretary rebuffing any  speculation that he was running for public office or being tapped as  president of Dartmouth College, where he received is bachelor's degree in  government and Asian studies.

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