Geithner testimony on financial rescue plan

WASHINGTON (Reuters) - The following are highlights of U.S. Treasury Secretary Timothy Geithner’s testimony on Tuesday to the Senate Banking Committee on the U.S. government’s revamped financial rescue plan:


“When the basic funding sources for that dried up and when the amount of credit protection no longer proved sufficient, you saw those resources fall away -- huge, acute damage to the muni markets. ... There are a group of people in the Treasury and the Fed who are looking out for any new ideas on how to address this problem. We are open to suggestions. To be honest with you, I have not yet seen a good idea which I think would be an effective use of resources, again relative to the costs of risks.”


“It is very important that we let the world know, the American people know, that we will take whatever action to help prevent the kind of failure that would cause systemic damage to our system. I think that is a very important thing to say and it’s important that our actions meet that test.”

(Asked if some banks are too big to fail:)

“I don’t think Senator I want to use those words but I do believe deeply and I think we have had a lot of experience over the last 18 months seeing the consequences of alternative strategies, that it’s important for our country that we do what is necessary to help stabilize the core of our financial system.”


“This plan is fundamentally different in broad objectives and direction.

“The path our country has pursued to date was too limited in support -- it came late, it came with too little broad trust in confidence and too little direct support to the businesses and consumers and households that were most affected by the crisis. People who were careful and responsible in their actions, but were damaged by the judgments of those who did not.

“And we are going to bring much broader, more rigorous standards for transparency and accountability with tougher conditions to protect the taxpayer.

“We are going to bring a forceful approach targeted at strengthening banks, getting these credit markets going again.”


“Our system is still very damaged and across the country you are seeing businesses find their credit lines cut and average Americans finding it tough to raise the funds they need to do important things, like put the kids through college, finance a new home. We have not seen enough impact of this yet, that’s in part because the economy is ... weakening, we are facing an escalating, very challenging recession and that is working against the efforts that we made over the course of the fall to help stabilize the system. The action that Congress took in the fall to authorize the Emergency Economic Stabilization Act, that action made it possible for your government to take some very important steps to pull the system back from the edge of catastrophic failure and that action has helped to bring a better tone of stability and some improvement to the financial system. Without that we would be sitting here today with a dramatically worse crisis, dramatically hard to solve, costing more resources over time.”


“I do believe that as a critical part of the broad reforms we’re going to need to undertake to make sure a crisis like this does not happen again, an important part of that will be to re-examine the overall supervisory structure around insurance companies. And I think these proposals to have a federal charter have a lot of merit, and we’ll look at them very carefully, and again my personal view is that that could be an important part of the plan.”


“I’m not standing here before you today to ask you to authorize more resources. I want to be candid, though, that I think this is going to be an expensive problem for the nation and it’s going to require substantial resources. But Congress has already authorized substantial resources, and I think our first obligation is to move to use those resources as carefully and as effectively as possible.”


“We are committed to use a substantial part -- at least $50 billion -- of the resources authorized by Congress to support a set of programs to help get mortgage payments down where it’s appropriate to do that, to help people refinance and stay in their homes, and to try to get broader interest rates down.”