Job No. 1 for the Obama administration continues to be fixing the economy. The unemployment rate currently stands at 8.9%. The housing market remains fragile as joblessness drove up foreclosures in 72% of the 206 major metro areas over the past year. And the White House is locked in budget battles with Congress over how to tame the federal budget deficit–projected at $1.6 trillion for 2011 by the Office of Management and Budget–without wrecking the recovery. At stake: President Obama's visionary plan to "win the future†through investments in industrial innovation, education, and infrastructure so America can "out-innovate, out-educate, and out-build the rest of the world.†Many Americans, however, are seeking immediate relief. With an unemployment rate above 15%, hordes of African Americans have been among the most battered by economic forces. The Center for American Progress, a nonpartisan research institute, reports that "as the economic recovery deepens and the labor market recovers, communities of color will have to climb out of a deeper hole to regain the same level of economic security as they had before the crisis.†Against this backdrop, Editor-in-Chief Derek T. Dingle talked with Treasury Secretary Timothy Geithner to gain answers to our readers' questions about the economy. In this exclusive interview held after the State of the Union address, the two discussed, among other topics, financial reform, small business lending, and job creation. The following are edited excerpts: What is the current state of the American economy? We're making progress but we have a lot of challenges. We have very high levels of unemployment still and we've got these very large, unsustainable long-term deficits. What the president did [in the State of the Union speech] was to lay out a very optimistic, very confident vision for how we meet those challenges and what we need to do in the United States to make sure that we're making more progress, creating a stronger economy, and going back to living within our means. The president's plan calls for investments in innovation, education, and infrastructure. Given the federal budget deficit, how can the government pay for that? The things we need to do to make sure that we are creating more things in the United States, that we're rebuilding infrastructure and we're educating our children, those are things that we can afford as a country. Of course, we have to make sure we can demonstrate to the American people that we can spend less on less important things [and] spend their taxpayer resources much more wisely. If we do that we can afford to make those targeted investments. They have huge returns to the American economy in terms of higher growth rates, more opportunities for Americans, more income growth for Americans. The president has had major battles with Congress over budget priorities and deficit reduction. It's not complicated to figure out how you reduce the deficit. What's complicated is figuring out how to do that in way that's going to be good for the economy, not kill future investment, growth prospects, and in a way that's going to be fair to working families [and] middle-class Americans. And that's a debate where there are big differences between the president's views and [those] of people in Congress, some on both sides of the aisle, but particularly Republicans. We have to figure out a way to resolve those differences. The president said, ‘Nothing is going to pass Congress unless Democrats and Republicans agree.' So we have to figure out a way to get people on both sides of the aisle who want to solve problems to come together. Why does the corporate sector still lack confidence when it comes to hiring? The economy went through the worst crisis we had seen since the Great Depression. It was a shattering blow to the basic confidence of Americans and American business. It's going to take some time for people to be more confident that it is definitively behind them and make them believe that they can take a risk again on the strength of the American economy, but that's happening now. If you look at how businesses are spending their resources now, private investment grew at a roughly 10% annual rate last year, much more rapid growth than the overall economy as a whole. So you're seeing businesses start to put their money to work again, start to take a risk again, and in doing that they've added back 1 million jobs in the last 12 months. I think you're going to see the pace of job creation now start to accelerate as growth gets stronger. How do you encourage more lending to small businesses? The president put in place a sweeping, very creative, comprehensive set of measures and a bunch of tax incentives for small businesses. You're starting to see for the first time the rate of growth of lending by banks to small businesses starting to strengthen. If you talk to banks across the country, they're saying they're starting to see more demand from small businesses for lending, which is good. That's a sign that they think there's going to be more demand for their products. We have a program in place that gives states substantial resources to put more ammunition into their lending programs for small businesses. We want to make sure that if someone has an idea [and] wants to create a new business, they can get funding. If someone has an existing business and wants to expand, we want to make sure they can find the financing. The change in capital requirements has hampered financial institutions like BE 100s banks. How do you reconcile new rules so community banks can start lending? [In] the financial reform legislation Congress passed last year, we were very careful to make sure we protected small banks from the risk that they would be burdened by new regulations that would get in the way of them trying to help their Main Street business customers. I think when you are having financial crisis there is always a risk that supervisors, examiners, regulators who may feel like they weren't tough enough in the good times, tend to try to overcorrect a little bit after the boom. We've tried to make sure examiners are not overdoing it, that after being a little too soft they don't shift to be too tough and therefore get in the way of helping the economy recover. What is the status of the consumer protection bureau and other measures related to financial reform? The most important thing was to establish in one bureau in the federal government a set of authorities to protect consumers at a national level. We're now in the process of trying to build up that agency. [Its head] Elizabeth Warren is focused on two important initial things: making sure that we simplify for people who want to buy a house or refinance their house the mortgage disclosure form [so] they can better understand the terms of their loans. She's also focused on trying to simplify credit card agreements so that, again, consumers find it easier to get better terms and harder to be taken advantage of. This new bureau is going to meet the basic challenge we all have, which is to fix this system that did a very bad job of protecting average Americans. What are the next steps to curb the high incidence of foreclosures? The principal thing that's driving the rate of foreclosures across the country, and it's not surprising, is the high levels of unemployment. If someone loses [his or her] job, or your spouse loses his or her job, you're going to find it hard to meet your monthly payments on your house until you get back to work. Until we get the economy to grow more rapidly and the unemployment rate down more definitively, it is going to be hard to get the housing market back on its feet more quickly. We're trying to make sure we reach as many Americans as we can and give them a chance to stay in their house. We can't reach everybody. You're helping those who were considered responsible homeowners and found themselves in this situation from no fault of their own? Exactly. Not only that, [but] you had people who were taken advantage of and we need to help them out. You have people who were completely innocent victims who were responsible [about] how they borrowed, bought a modest home, but who saw all their neighbors lose their homes. So house prices in their neighborhood fell very, very sharply. That hurt them a lot too. Again, that's why it's so important that we do what we can to get the economy growing again and get house prices rising again and try to reach people who really deserve to be helped stay in their homes. The Center for American Progress recently recommended that the Obama administration develop targeted programs for communities of color. Is the administration developing such programs? The impact [of a recession] falls much more severely on African American communities [and] urban areas. The programs that we designed are designed to go to where the needs are greatest. We have a program in the housing market which gives 18 states at the center of the crisis still a substantial amount of resources that they can use to help people who are unemployed and risk losing their home or give people greater principal reduction on their mortgages. We think that's a good strategy. We've also tried to put substantially more resources into the Community Development Financing Program and into our New Market Tax Credit Program so we are directing resources where they're needed most and where in the past we've seen they have huge benefits in helping communities get back on their feet more quickly. The president always talks about looking for new ideas. Have you reached out to these communities for advice and input? We do. One thing we've tried hard to do is to make sure we're listening to anybody who comes in with an idea. The people who have the most impact on the decisions we make come not just with a problem or challenge but they say here's the best thing you could do to help us to fix that problem. The programs we designed in the housing area, for small banks [and] for small businesses reflect that input. Part of what we try to do is direct more to the states and local communities because, in many cases, they're going to have a better feel for what works than we can have here in Washington. We try to get the balance right. Â