(CNN) -- Paul O'Neill, who was appointed treasury secretary in 2001 by President Bush, says the federal government is not doing enough to fix the U.S. financial system.

Former Treasury Secretary Paul O'Neill says he's hoping for a "V-shaped" recession.

O'Neill appeared on CNN's "Fareed Zakaria GPS" on Sunday to talk about his outlook on the recession and what the Treasury Department should demand of major financial institutions in order to get the U.S. economy back on track.

Following is an edited transcript of their conversation.

Fareed Zakaria: Looking at the current economic crisis, do you think there is any prospect of what people call a "V-shaped recession," that is, a quick recovery? Or are we in for a long, perhaps years of sluggish growth, what economists call an "L-shaped recession"?

Paul O'Neill: You know, I've got to tell you, I'm praying for a V- shape. But I'm one who doesn't believe we're going to start moving back up until there is a credible fix for our financial system. And I think, in spite of all of the things that have been done now by the federal government, we're not quite there.

If I were secretary, I would do this. I would order the 19 major financial institutions to put on the Internet the classifications of their assets by investment grade rating, beginning with AAAs down through BBB-minuses, which is the final level of investment grade ratings.

And for those parts of their asset holdings that can't be rated investment grade -- or, in fact, as they say, can't be valued or can't be fairly valued -- I would create a new device which I call a "quarantine account."

One could make a judgment about the value of these institutions, and the institutions could make a self-judgment, about how much more lending capacity they had, if the quarantined assets are set aside.  Watch O'Neill offer his advice to Obama administration »

Zakaria: The basic idea -- the basic proposal you're making is transparency. Let everyone understand what's on the banks' books.

O'Neill: Right.

Zakaria: Isn't that a lot like Tim Geithner's stress test?

O'Neill: Well, I don't think so. Let me ask you a question. How do you think it's possible to do a so-called "stress test," if 30 or 40 percent of the assets in the institution can't be valued?

Here's another plea I have: If you can't value the assets, please don't buy them with my money.

Zakaria: You mean the government shouldn't be buying these toxic -- these assets. So you think the Treasury Department's proposals so far are all wrong. I mean, it sounds like you think they're doing all of the wrong things.

O'Neill: Well, you know, excuse me, but I'm not one who cares much for the notion of separating the idea of the government as some disembodied entity that has a life independent of me.

The money that they're committing and spending is at least in part mine. I'm a substantial taxpayer, and I don't want my representative to buy assets with my money that I wouldn't buy.

Why would I want to do that, Fareed? Why should we want them to do that?

Zakaria: But this is a pretty frontal assault then on the Treasury's bank plan so far.

O'Neill: Well, you know, I don't mean to be offensive to this administration or the last one, but it seems to me, if you're an intelligent investor, you invest in things where there is truth and transparency. And you have a shot, if you're a good leader, at earning the cost of capital and maybe even something more.

And I think that basic principle ought to apply to how our government thinks about what it's doing in the name of "we, the people."

You know, I
what does O'Neill say What should the US demand? Who is saying this?
he's hoping for a "V-shaped" recession. major financial institutions in order to get the U.S. economy back on track. Former Treasury Secretary Paul O'Neill
question: what does O'Neill say, answer: he's hoping for a "V-shaped" recession. | question: What should the US demand?, answer: major financial institutions in order to get the U.S. economy back on track. | question: Who is saying this?, answer: Former Treasury Secretary Paul O'Neill