Today the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled "Oversight of the Troubled Assets Relief Program." Treasury Secretary Timothy Geithner was the sole witness testifying before the Committee.
In his initial remarks, Ranking Member Richard C. Shelby (R-AL) asserted that there has been "a massive waste of taxpayer dollars" because there was no clear strategy for deploying the $700 billion (of which "Treasury estimates at least $123.7 billion in resources" is still available) of TARP rescue funds as provided for pursuant to the Emergency Economic Stabilization Act of 2008 (EESA) passed by Congress this past October. In response, Secretary Geithner stated that the U.S. financial system was "starting to heal" after a period of severe trauma, as indicated by such "welcome signs" as a decline in leverage and reductions in spreads on investment grade corporate bonds and municipal bonds, and that "banks are funding themselves more conservatively." Secretary Geithner briefly discussed the various programs and initiatives the Obama administration has undertaken in the past several months, and in particular stated that Treasury expects the Public Private Investment Program, designed to "restart the market" for troubled legacy assets, to begin operating over the next six weeks.
Senator Jim DeMint (R-SC) questioned how much money Treasury believes will be returned to its general fund upon repayment of TARP funds. Treasury Geithner did not provide a specific dollar amount but estimated with "substantial probability" that substantial amounts of money will be returned with interest through the various programs recently implemented. Moreover, he stated that Treasury will "not continue to be a player" in the financial system once "conditions normalize," as it is "not healthy" for sustained government involvement, rather it should be "temporary and we need to exit quickly." Secretary Geithner then briefly discussed the recent "modest" repayments of TARP funds and potential to redeploy such funds to other financial institutions, including community banks who did not initially receive TARP funds, and for additional economic programs. Committee members then pressed whether any redeployment of TARP funds by Treasury would comply with Section 106(d) of EESA which requires "Revenues of, and proceeds from the sale of troubled assets purchased under the Act … to be paid into the general fund of the Treasury for reduction of the public debt." Secretary Geithner felt that Treasury "had the flexibility" to redeploy funds, to which Chairman Dodd (D-CT) agreed stating that the intention was to have "some level of flexibility" in the Act.