Testifying before an oversight panel for the Troubled Asset Relief Program Thursday, Treasury Secretary Tim Geithner said that the U.S. economy is much improved, but struggling against “headwinds” like high unemployment and foreclosure rates. As a result, he argued, the government must continue to use the tools in its arsenal, such as TARP, to maintain financial stability, even while winding down emergency initiatives.
Geithner announced Wednesday that the government’s $700 billion bailout program would be extended until October 2010, and he defended that decision today before a skeptical committee.
“History suggests that exiting too soon from policies designed to contain a financial crisis can significantly prolong an economic downturn. While we exit our emergency financial policies, we must not waver in our resolve to ensure the stability of the financial system….”
Geithner faced questions from the committee related to its report, released Wednesday, on TARP’s achievements — and failures — at the end of its first year. The committee found that while the bailout program has helped stabilize the financial system, significant and ongoing problems remain: Banks are still reluctant to lend, toxic assets remain on the balance sheets of many financial institutions, banks continue to fail across the country, and markets are still dependent on government support. Paul Atkins, a committee panelist and formerly of the Securities and Exchange Commission, said Thursday that extending TARP “borders on irresponsibility.” In response, Geithner cited the better-than-expected returns taxpayers are receiving from the program. Earlier this week, the Treasury announced it expects TARP to cost $200 billion less than earlier projections, largely as a result of earlier repayments from large banks. Bank of America* announced Wednesday that it had successfully paid back its $45 billion in TARP funds. * For the record, Bank of America is a NewsHour underwriter.