US Treasury Secretary Timothy Geithner said on Thursday a strengthening economy means the government can end some of the extraordinary support it put in place for markets and prepare for a slow recovery.
Appearing before the Congressional Oversight Panel for the US$700 billion Troubled Asset Relief Program (TARP), Geithner said the economy was in far better shape now than a year ago when it was “on the verge of collapse,” though it still had problems.
“As we enter this new phase, we must begin winding down some of the extraordinary support we put in place for the financial system,” he said. “We are now in a position to evolve our strategy as we move from crisis response to recovery.”
Geithner faced a grilling from the TARP panel members, who wanted to know why taxpayer-provided aid was so available for financial firms but not to other types of businesses. He suggested the decision to aid banks was paying off.
Geithner said banks that received capital injections have repaid more than US$70 billion, reducing the government’s total investment to US$180 billion. and estimated another US$50 billion will be repaid over the next 12 to 18 months.
“We still have a long way to go before true recovery takes hold,” he told the panel, adding it will be necessary to keep applying stimulus measures as necessary to get growth firmly back on track.
Geithner boasted that the economy now was “back from the brink” of the free fall that it was in when the administration of US President Barack Obama took office in January even though recovery likely will be gradual at best.
But he cited a litany of problems still facing the economy, including “unacceptably high” unemployment, a shaky mortgage market outside those covered by mortgage finance sources Fannie Mae and Freddie Mac, strained financing for commercial real estate enterprises and tight credit for small business.
Given those conditions, “it is realistic to assume recovery will be gradual, with more than the usual ups and downs,” Geithner warned.
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