Asked how well the federal bailout plan is working, Geithner
told a congressional oversight panel: “To date, frankly, the evidence is
Listen to Geithner’s opening statement:
Geithner faced a battery of questions over the Treasury’s
public-private partnership investment plan to rid financial institutions of
their troubled assets.
Harvard University law professor Elizabeth Warren, the chair
of the Congressional Oversight Panel for the Troubled Assets relief Program, or
TARP, stressed the need for more transparency and accountability.
“The sense of fear and uncertainty has not gone away,
but it’s been joined by a new sense of anger and frustration,” Warren
said, according to the Associated Press. “People are angry that, even if
they have consistently paid their bills on time and never missed a payment,
their TARP-assisted banks are unilaterally raising their interest rates or
slashing their credit lines.”
Geithner said that borrowing costs remain high and credit is
still not flowing normally despite massive government efforts to restore
lending to normal, the New York Times reported.
Despite government help, “the cost of credit is still
very high. Reports on bank lending show significant declines in lending for
consumer loans, for commercial and industrial loans, although mortgage
refinancings have picked up considerably,” he said.
He said that some areas of the credit market have improved
recently as the government established programs to ease lending among banks,
for home mortgages and commercial loans and credit for small businesses. But,
the programs have not been a panacea for all lending problems, he said.
Panel members asked Geithner how the government should
decide when banks are able to repay bailout funds.
though we have to look at two things,” he replied, according to the Times.
“One is, do the institutions themselves have enough capital to be able to
lend? And does the system as a whole, is it working for the American people for
recovery? And that’s the standard we’re going to look at.”
Geithner’s testimony came in the wake of a watchdog agency
report that warned administration initiatives could increasingly expose
taxpayers to losses and make the government more vulnerable to fraud.
An inspector general assigned to the bailout program
concluded that a private-public partnership designed to buy up bad assets is
tilted in favor of private investors and creates “potential unfairness to
The 250-page report from Neil Barofsky, special inspector
general for TARP, also recommends that the Treasury Department require all TARP
recipients to report on their actual use of the funds.
Also Tuesday, the Treasury Department announced that there
are $109.6 billion in resources left in the government’s $700 billion financial
But officials expect the fund will be boosted over the next
year by about $25 billion as some institutions pay back money they have
received. That would boost the fund to $134.6 billion.
The accounting details were made by Geithner in a letter to
Warren. The reserves should be enough for the Treasury to avoid asking Congress
for more money, Geithner said.
“We have the resources to move forward implementing all
aspects of our Financial Stability Plan,” Geithner said in a letter to the
panel overseeing the bailout, according to Reuters.