Former Treasury Secretary Geithner Gives Economic Update to NJ Investment Council

By David Cruz

Former Treasury Secretary Timothy Geithner has been known to crack a smile every once in a while, like before his talk with the State Investment Council this morning. This is how most of us remember Geithner, as the grim-faced treasury secretary credited or blamed — depending on your perspective — with leading the country’s response to near collapse of the financial system in 2009. Six years later, he’s a much lighter touch, even making jokes.

“If you think I’ve said anything in response to your question, you’re mistaken,” he said.

Geithner’s appearance before the annual meeting of the Investment Council was intended as an update on the state of the world’s economy for the board which manages the state’s $80 billion state investment portfolio. To that end, Geithner was a low key fountain of information, most of it good.

“By most measures, our economy looks more resilient now and has got a better chance than any major economy in the world to sustain for a period of time what has been a period of reasonably steady growth and that’ll be very good,” he said.

Geithner says the world is bullish on the U.S. economy and pointed to a relative slowdown in Asia, and Europe’s continuing slow recovery as evidence that the U.S. is a locomotive, by comparison. He said Germany is showing signs of pragmatism toward a potential restructuring of Greek debt, a hopeful sign. And added that China, despite a relative cooling of its economy, is still a key pillar of the world market.

“They have tremendous resources. They’re also a very rich country in many ways. They have a high rate of savings and they have a lot of tools to manage that process without going through a period of much slower growth,” he said.

Having said all that, Geithner warned against any irrational exuberance. He said at a 3.5 percent, the U.S. economy is in full, if not exactly robust, expansion, which it’ll need to sustain in order to regain losses in jobs, income and confidence. To that end, Geithner, who nowadays runs a private equity firm, said the country must come to terms with the need to make critical investments if things are going to continue to improve.

“If you don’t spend to improve infrastructure, you can ask yourself, ‘Are you really saving money?’ because all you’re really doing is deferring the point when you have to spend more money. You’re not really saving money,” he said.

The Investment Council also held its regular monthly meeting today, where staff discussed the fund’s performance over the last few years, steady modest growth, but growth that put it in the top 10 across the country, said staff. As for a new chairman — Tom Byrne has been acting chairman after Bob Grady’s resignation in November — the council put off selecting a new one until its next meeting in February.