Today, in his first hearing as Treasury Secretary, Timothy Geithner appeared before the Senate Banking Committee to answer questions concerning the Financial Stability Plan (the “Plan”) announced earlier today. In his prepared statements, Secretary Geithner “[laid] out the broad outlines of the basic goals and strategies” for the Plan. Secretary Geithner’s statements highlighted Treasury’s goal to “get credit flowing again, to restore confidence in our markets, and restore faith of the American people."
Specifically, Secretary Geithner articulated the following principles:
- The need for increased transparency and oversight;
- A required “stress test” to evaluate the strength of financial institutions and provide the needed capital support for institutions that need it through a bridge to private capital;
- Establishment of a Public-Private Investment Fund to provide government capital and government financing to help leverage private capital and get private markets working again;
- Commitment of up to $1 trillion to be used for a Consumer and Business Lending Initiative to “kick start” the secondary lending markets, bring down borrowing cost and start credit flowing again; and
- The creation of a comprehensive housing and foreclosoure mitigation program.
While many members commended Geither for testifying before the committee, less than two weeks after his appointment as Treasury Secretary, he was confronted with many questions that he was unable to answer with great specificity. Committee Chairman Christopher Dodd (D-CT) responded to Geither by saying, “We’re talking in denominations that are daunting. The magnitude of the request is overwhelming.” Commenting on taxpayer frustration, he went on to say that “[e]ven as we spend billions of their dollars, they've yet to see the results.”
Senator Richard Shelby of (R-Alabama), the committee's ranking Republican, criticized Geithner for outlining “a conceptual plan with many details yet to be filled in”. This is a sentiment that resonated with members on both sides of the aisle. Senator Shelby went on to say, “If all you have at this point is the broad outlines of the plan, then this committee will need to have another hearing or several once you’re prepared to offer more concrete details.”
As questions were posed, Secretary Geithner attempted to provide more particulars and revealed that the Plan, among other things, is “fundamentally different in broad objectives and directions” than what Treasury has previously done, would commit at least $50 billion in foreclosure prevention and would reexamine the regulation of insurance companies. Secretary Geithner expressed the administration’s desire to lay out the “broad architecture” for the Plan and to reveal more specifics as the Plan is further designed, but stressed the urgency of moving quickly to solve the troubles facing the financial system.