Geithner Revamps Bank Rescue Plan

Read the Full Transcript

• JIM LEHRER:

  There were two major moves today on the effort to boost the economy. The Treasury Department announced a revised plan to aid banks and other financial institutions, and a stimulus bill cleared the Senate.

  Judy Woodruff has our lead story report.

• JUDY WOODRUFF:

  In the ornate Cash Room of the Treasury Department, Secretary Tim Geithner unveiled the revamped plan to tackle the still-unfolding crisis.

  TIMOTHY GEITHNER, Treasury secretary: This is a dangerous dynamic, and we need to arrest it. It's essential that every American understand that the battle for economic recovery must be fought on two fronts. We have to jump-start job creation and private investment, and we must get credit flowing again to businesses and to families.

• JUDY WOODRUFF:

  The existing $700 billion rescue effort for banks would continue, but some of that money would go to attract even larger sums from the Federal Reserve and the private sector.

  One part would be a joint Treasury-Fed program, encouraging investors to buy bad mortgage-related assets from banks. Geithner said the initial cost would be $250 billion to $500 billion.

  Another part would expand an existing Fed program to spark the market for commercial, student, auto and credit card loans. It could have a price tag of a trillion dollars.

  Geithner warned the road ahead won't be easy or cheap.

• TIMOTHY GEITHNER:

  I want to be candid. This strategy will cost money, it will involve risk, and it will take time. But as costly as this effort may be, we know that the cost of a complete collapse of our financial system would be incalculable for families and for businesses and for our nation.

• JUDY WOODRUFF:

  Later, Geithner pressed his case at the Capitol where senators said they need more information on what's in the works.

• SEN. RICHARD SHELBY, R-Ala.:

  It appears here that your plan is offering only at this point a conceptual plan, with many details yet to be filled in. It's hard to test the merits of a plan that is not spelled out, as you well know.

• TIMOTHY GEITHNER:

  Senator, you're right that what we did today was lay out the broad architecture of the programs we think are necessary to help solve this thing. And we're going to be very careful to flesh out the details and design of these things in ways that protect the taxpayer and get the maximum potential benefit for the resources we're going to spend.

• JUDY WOODRUFF:

  At a separate House hearing, Federal Reserve Board Chairman Ben Bernanke insisted the Fed's efforts have already helped, and he defended the new plan.

• REP. CAROLYN MALONEY, D-N.Y.:

  Obviously, the bank system is the wheel that has to get our economy going, yet we hear that part of the new program is there's going to be a business and consumer loan program coming from the Federal Reserve. Why is that coming from the Federal Reserve? Shouldn't that be coming from our financial institutions? Why can't we get them working properly?

  BEN BERNANKE, Federal Reserve chairman: Congresswoman, one very important fact about the American financial system is that only about half the loans in normal times come through banks. The other half goes through other kinds of markets like securitization markets.

  And all the programs I described today are about getting credit card lending, auto loans, student loans, commercial paper loans, mortgage loans, commercial mortgage-backed securities, all those things going again. That program will help get credit flowing outside the banks, so that's an important part, because that's about half of our credit system.