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Mr Sims says the ECB needs to be reassured its own balance-sheet has sound fiscal backing.
Fiscal policies that stabilize debt may not provide the fiscal backing necessary for monetary policy to successfully target inflation.
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"To be robust, such a system needs access to financing and a fiscal back-up mechanism for any net resolution costs," he said.
"It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time," he said.
"It is very important just to underscore that the future evolution of the dollar's role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time," Geithner said.
"We are going to bring fiscal sanity back to this great nation," he said.
As growth recovers, he said, the administration plans to move its "fiscal position back into balance".
Still, he said, the government needs to think about putting its fiscal house back in order.
The fiscal compact, backed up by a well functioning fiscal authority would practically eliminate the risk of default.
Go over and read Simon Johnson and James Kwak's four-step strategy for putting America's fiscal house back in order.
He said he would seek to institute changes at the committee to bring "fiscal sanity back to our budgeting process".
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