Tim Geithner and Treasury Have Some Explaining to Do

by Jeff Reeves | June 27, 2011 12:08 pm

If you could ask one question to Treasury Secretary Timothy Geithner, or any other member of the U.S. Treasury Department, what would it be?

InvestorPlace.com wants to know – because thanks to a generous offer from the White House, I will be given access to top Treasury officials and will have the opportunity to ask a few questions. Any topic relating to the Treasury Department is fair game – the automaker bailouts, the debt ceiling, bond auctions and all things in between.

So if you want give the Treasury a piece of your mind, this is your chance.

I have a number of questions I’d personally like to ask, which I’ll share with you in a moment. But I’m very interested to see what concerns you personally. The reason I get out of bed in the morning is to advocate the interests of individual investors like you, and I want to make sure your voice is heard.

So please post your thoughts in the forums below or drop me a line at editor@investorplace.com. Just keep in mind that this is not access to the entire Obama administration – only the Treasury. Your questions about Medicare or the strategic petroleum reserve may be good ones, but are best directed at a different department.

Here are five hard questions I think Secretary Geithner and his staff simply must answer, considering the state of our economy right now:

On the auto industry bailout

Secretary Geithner wrote a column in The Washington Post a few weeks back about why the auto industry bailout was a success, with GM returning to profitability and thousands of jobs saved. But you also admit in the column that “years of bad decisions had caused them to progressively lose market share to foreign competitors” and that “we will not get back all of our investments in the industry.”

How is it ever a success to prop up to companies that made bad business decisions – and then admit the government “loan” will never be repaid? Sounds like both a failure of free markets and an ill-advised extension of credit to some folks.

On the debt ceiling

The Treasury continues to send out dire warnings that America must meet all of its obligations — not just our interest payments but to seniors who rely on Social Security and Medicare.

Can you explain with some real numbers how real the threat of default is? Because by my math, interest on the national debt is $164 billion according to the 2010 budget – a mere 5% of the total budget and a mere 7% of total U.S. revenue. I just cant believe that’s going to break the bank.

And how real is the threat of reduced or canceled Social Security checks? While this program is much more substantial, there seem to be plenty of other areas in the budget that can be mothballed at least temporarily instead of cutting millions of dollars out of the economy when we need it most.

On record low rates due to Fed bond-buying binges

The Fed’s Treasury-buying program helped corporations a great deal by driving down rates to spur borrowing. In fact, Google (NASDAQ: GOOG[1]) floated its first ever bond offering as a result. But the spreads in yields over comparable Treasury bonds were extremely narrow – 58 hundredths of a percentage point for the 10-year Google bonds, which yielded 3.73 percent, and even less for the other maturities.

Let’s not debate the benefit of giving corporations access to cash on the cheap – but what does the Treasury say to the fact that with bonds so paltry, many income-oriented investors looking for bigger yields and lower risk have no place to turn? How long will policies at the Treasury and the Fed keep corporate bonds so anemic?

On China divesting itself of Treasuries

How likely is it that China could bail out on its huge pile of U.S. Treasury Bonds, and to what degree could we see damage to the dollar and our overall economy as a result of China refusing to buy any more of our debt?

It seems now that the Fed is a bigger holder of U.S. debt than China – so skeptics may point out that Fed Chairman Ben Bernanke could just snap up whatever China doesn’t buy. Is this a possibility, further entangling Treasury assets in a shell game similar to “quantitative easing?”

On “too big to fail”

In the wake of the financial crisis, banks have only gotten bigger. Toxic assets killed smaller financial firms and medium companies were swallowed whole by bigger banks.

How in the world is this going to prevent systemic risk? If we already set the precedent that these banks were too big to fail when they had less reach, how have we fixed the problem?

What are your questions for the U.S. Treasury?

Please post your thoughts below, including any questions you would ask top U.S. Treasury officials if given the chance. You can also send them directly to me via an email to editor@investorplace.com.

Please remember, however, this is not the forum to take on other issues political issues – I have plenty of questions I’d like answered myself on a host of other topics. But this will be only a session with the Treasury Department, and questions should be crafted accordingly.

I’m excited to share this opportunity with readers like you, so please let me know what your thoughts are. Engage in the commenting below to sound off !

Jeff Reeves is the editor of InvestorPlace.com. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

Endnotes:
  1. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG

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