Home / World Business
Thu, Apr 23, 2009 - Page 10 News List

Banks are still in distress, Geithner informs overseers

AP , WASHINGTON

US banks are still broken despite all their bailout billions, US Treasury Secretary Timothy Geithner told impatient rescue overseers on Tuesday as they pressed him on when things will get better and how much it will cost.

How well is the mostly spent US$700 billion federal bailout working?

“To date, frankly, the evidence is mixed,” Geithner told a congressionally appointed oversight panel.

Confidence in the program is wearing thin on Capitol Hill. With lawmakers back from their spring break, even bailout supporters are skeptical that Congress — weary of bankers’ bonuses and still-scarce credit — would approve additional bank rescue money if requested.

Geithner’s testimony signaled that the administration was not preparing to ask.

Of the US$700 billion authorized by US Congress for the Troubled Asset Relief Program in October, Geithner said about US$110 billion is left. With about US$25 billion expected to be repaid this year, the total available is about US$135 billion.

Some banks are maneuvering to pay back some of the bailout money, unhappy with the strings attached. But Geithner said that doesn’t mean the government would necessarily accept the repayments.

These questions have to be first answered, he said: “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?” A series of “stress tests” are being administered to banks by the administration to help judge their financial health.

The treasury secretary said that while most banks have more than enough capital to satisfy federal regulators, a combination of factors — including worries about the broader economy and the crushing weight on their balance sheets of bad loans and other toxic securities — was feeding “uncertainty about the health of individual banks.”

That, in turn, “has sharply reduced lending across the financial system” and was holding back economic recovery, he said.

Geithner said efforts by the US President Barack Obama administration to gain legislative authority to more closely regulate sprawling financial institutions like American International Group that are not banks.

Former Republican senator John Sununu of New Hampshire told Geithner that uncertainty over the bank stress tests and the prospect that the government might take a more active shareholder role in bailed-out banks was leaving “more questions unanswered than answered.”

Geithner insisted steps taken by the administration were helping to cushion the economic pain from what he called a continuing “very severe financial crisis, the worst in generations.”

Meanwhile, Nobel laureate economist Joseph Stiglitz said stricter rules on the use of bailout money is needed as well as a signal that there is no more money in the pipeline.

“I think it is imperative that Congress narrow the breadth of this new corporate welfare state,” he told the Joint Economic Committee at a separate hearing. “It is people that we should be protecting, not corporations.”

This story has been viewed 1300 times.
TOP top