THE OBAMA administration will take action on a “dramatic scale” to revive credit markets and strengthen banks so they are able to lend, treasury secretary-designate Tim Geithner said yesterday.
Testifying to the Senate committee considering his nomination, Mr Geithner said the Obama team was working on a “comprehensive plan” to deal with the banks and hoped to unveil it soon.
“We’re going to have to do more to make sure that the institutions at the core of our system are strong enough that they can lend,” Mr Geithner told the Senate Finance Committee.
The plan will address the credit crunch and the collapse of the housing market, as well as global economic conditions requiring a co-ordinated response.
Obama “will come before the Congress in the next few weeks and lay out to the American people a comprehensive plan to help stabilise the core of the financial system so that banks, which are so critical to our economy, are able to provide the credit necessary to get recovery going again,” Mr Geithner said.
He refused to offer any insight into how this might work, in spite of pressure from the markets, saying “we have seen the costs in terms of uncertainty created by tentative signals not followed up with clear actions”.
The treasury nominee also urged Congress to pass a robust stimulus plan to revive the economy and pledged to overhaul the government’s $700 billion bailout programme.
His remarks came as he repeatedly apologised for underpaying his taxes by almost $50,000 – a revelation that had delayed his confirmation hearing.
Mr Geithner, president of the Federal Reserve Bank of New York, said his tax errors were “careless” and unintentional. “I should have been more careful. I take full responsibility for them,” he said.
The vast majority of members of the committee appeared willing to accept his apology. Mr Geithner (47) is still likely to win confirmation as Obama’s economic policy chief, lawmakers’ public remarks indicate.
Mr Geithner cited small business funding, student loans, car finance and commercial and residential real estate loans as priority areas. Asked about the idea of creating a so-called “bad bank” – dubbed an “aggregator bank” by some – to take on the toxic assets in the banking system, he said “good bank, bad bank-type solutions have been present at the solution to most financial crises around the world”.
But he said "it is very important that we look carefully at whether they're going to be as effective in this context as they have been in some past cases". – ( Financial Timesservice, Bloomberg)
