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Geithner defends bank rescue program amid warnings
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WASHINGTON (AP) — Treasury Secretary Timothy Geithner defended the bank rescue program devised by the Obama administration Tuesday as the International Monetary Fund predicted U.S. financial institutions could lose $2.7 trillion from the global credit crisis.

Geithner, testifying before the rescue plan's Congressional Oversight Panel, faced several questions about how Treasury is using the $700 billion Troubled Asset Relief Program and how it intends to help rid financial institutions of their bad loans and securities.

His testimony came in the wake of a watchdog agency report that warned Obama administration initiatives could increasingly expose taxpayers to losses and make the government more vulnerable to fraud.

A special inspector general assigned to the bailout program concluded in a 250-page quarterly report to Congress that a private-public partnership designed to buy up bad assets is tilted in favor of private investors and creates "potential unfairness to the taxpayer."

Geithner said the new plan "strikes the right balance" by letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.

"If the government alone purchased these legacy assets from banks, it would assume the entire share of the losses and risk overpaying," Geithner said in his remarks. "Alternatively, if we simply hoped that banks would work off these assets over time, we would be prolonging the economic crisis, which in turn would cost more to the taxpayer over time."

Geithner said "the vast majority of banks" have more capital than they need to be considered well-capitalized. But he said the economic crisis and the bad assets have created uncertainty about the health of individual banks and reduced lending across the system.

"For every dollar that banks are short of the capital they need, they will be forced to shrink their lending by $8 to $12," he said.

While credit conditions have improved in the past few months, "reports on bank lending show significant declines in consumer loans, including credit card loans, and commercial and industrial loans," Geithner said.

In a letter Tuesday to oversight panel chairwoman Elizabeth Warren, Geithner said that $109.6 billion in resources remain in the rescue fund. 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.

But under questioning from panel members, Geithner said that even if banks want to pay back the money, that doesn't mean the government would necessarily accept the payment.

"Ultimately we have to look at two things, 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," Geithner said.

The government's effort to stabilize the financial sector and unclog the credit markets has come under heavy scrutiny. Treasury officials say the Obama administration has been holding participants more accountable. Geithner sent key members of Congress six-page letters last week spelling out his department's measures.

Still, Inspector General Neil Barofksy, using blunt language, offered a series of recommendations to protect the public and took the Treasury to task for not implementing previous advice.

Overall, the report said the public-private partnership — using Treasury, Federal Reserve and private investor money — could total $2 trillion. "The sheer size of the program ... is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives," the report stated.

In particular, the report cited funds that would be used to purchase troubled real estate-related securities from financial institutions. Under plans unveiled by Treasury, for every $1 of private investment, Treasury would invest $1 and could provide another dollar in a nonrecourse loan. That money could then leverage a loan from another government fund backed mostly by the Federal Reserve, a step that Barofsky said would dilute the incentive for private fund managers to exercise due diligence.

Barofsky recommended that Treasury not allow the use of Fed loans "unless significant mitigating measures are included to address these dangers."

Among Barofsky's recommendations:

—Treasury should set tough conflict of interest rules on public-private fund managers to prevent investment decisions that benefit them at taxpayer expense.

—Treasury should disclose the owners of all private equity stakes in a public-private fund.

—Fund managers should have "investor-screening" procedures to prevent asset purchase transactions from being used for money laundering.


Copyright 2009 The Associated Press.

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Georgia Motorcycle Safety Program announces grant
Funds earmarked for Share the Road initiatives
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Grant funding totaling $93,458 has been awarded to the Georgia Motorcycle Safety Program (GMSP) by the Governor’s Office of Highway Safety. The approved funding will be used to increase motorcycle safety awareness and outreach by encouraging all motorists and motorcyclists to Share the Road.

“The need for motorcycle safety programs is greater than ever, and this support from GOHS enables motorcycle safety programs and impaired riding initiatives to reach riders and non-riders alike” said Commissioner Spencer R. Moore. “Thank you GOHS for helping (the Department of Driver Services) and GMSP educate and encourage all Georgia drivers to ‘Share the Road.’”

The grant allows DDS to further develop the Motorcycle Safety Outreach Program by continuing to fund a position to promote state and national safety initiatives. The GMSP outreach coordinator researches, coordinates and helps maintain an adequate presence at industry events, local schools and colleges, regional meetings and festivals to increase awareness of motorcycles on the roadways and provide the most current information on motorcycle safety initiatives.

Visitors to a GMSP event display are also encouraged to sign up for regular newsletters which provide additional safety information, as well as review the motorcycle safety message on other social media platforms.

GMSP regulates motorcycle training for new riders, as well as seasoned riders, who want to learn how to ride a motorcycle legally and safely. The program is based on a continuum of learning and therefore offers three entry points to rider education.

Students participating in the Basic Riders Course do not need specialized motorcycle equipment, as the GMSP provides both a motorcycle and a helmet to class participants. Upon successful completion of the course, participants receive a 90-day license waiver card that exempts them from both the written and on-cycle skills tests needed to obtain a Class M license in the state of Georgia.

Please visit the DDS website at www.dds.georgia.gov for many online services including the convenience of enrolling in a GMSP training class and accessing many licensing services.

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