Christina Romer was also asked about the potential downside of the Treasury Department plan to join with private investors to buy up to $1 trillion in so-called toxic assets.
Steve Inskeep: When companies do their quarterly reports, or annual reports, they talk about their business plan and what their hopes are, but they're also supposed to disclose risk, and talk about the downside. If I'm a taxpayer, you're asking me to take on a trillion dollars in what are considered toxic assets. Can you give me the risk?
It's actually very important to realize — there are two things. One is why we're doing this, and that's precisely because the market for these toxic assets basically disappeared, right? So we needed a way to get them off banks' balance sheets. And then, in terms of the risks, the whole idea is going in with the private sector, partnering with the Fed and the FDIC was a way to I think minimize the risk for the American taxpayer, so that — we don't have the expertise to know how to price these things. If we have private investors with skin in the game, money on the line, we think that's going to help us to make good decisions.
You want to spread the risk; that's well understood. What risk remains, for us as a country, in pursuing this plan?
I think the bigger part is to say what risk there would be if we didn't pursue the plan, right? The thing that has been so important is to realize that doing nothing is not an option. We have a very sick financial system. The only way that all of this is going to work again is if we get it lending again.
Are you reluctant to talk about what happens if this doesn't work, which is sort of what I'd want to know?
No, I'm absolutely not. What we're doing is doing the best shot that we can to minimize the risk to the American taxpayers. Yes, we are taking on some risk, but that's what's necessary at this point in time.
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