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Geithner's testimony to TARP Oversight Panel

WASHINGTON (Reuters) - The following are highlights from testimony by U.S. Treasury Secretary Timothy Geithner on Thursday at a hearing of the Congressional Oversight Panel on the Troubled Asset Relief Program.

GEITHNER ON CONSOLIDATING BANK REGULATORS:

“We don’t think it was necessary or desirable to try to force all of that into one entity -- partly because of the concerns of concentration of power, partly, frankly, because we’re asking the Congress to do a lot in a short period of time. And the guiding principal affecting our choices is we want to make sure they are focusing on things that are essential to do. ... But, of course, we’re open to suggestions and if there’s will in the Congress and interest in going further in terms of consolidation, we would be supportive of that.

GEITHNER ON FUTURE EXPANSION OF TARP:

“At this stage we don’t have any specific plans to substantially expand on the scope and use of areas of the TARP aid. But it’s possible that, looking at the standards remaining, (we) might make that judgment but we’d want to set a very high bar, and we’d want to demonstrate that’s an appropriate use of the taxpayer’s funds.”

GEITHNER ON MORTGAGE MODIFICATIONS:

“In the close to half a million (mortgage modification) offers that we’ve extended it’s not enough to have more than 350,000 households now benefiting from substantial reductions in mortgage interest rates. We need to make sure those are converted to things that that are going to work over time. And we are focused on making sure this program reaches as many eligible homeowners is possible.”

GEITHNER ON ECONOMY:

“It is only now we’re seeing positive growth for the first time. Unemployment is still very high and could stay high for some period of time. We are not close to being through this.”

GEITHNER ON EXTENDING FINANCIAL BAILOUT:

“I have not yet decided. We are going to think through that carefully ...

“I think some of these programs realistically are going to take a longer time to work. For example, we expect the foreclosures in the United States are going to last for a very long time. It’s very, very unlikely that we’re going to be at the point in the next few months to have said that the housing market is at a point where we can be confident that we can we can withdraw these exceptional actions. ... “The classic mistake people make is they declare victory too soon, they put on the brakes too early, they withdraw these things too early.”

GEITHNER ON BANK LENDING

“Bank lending ... is declining but it’s declined much, much less than it has in past recessions, much less than the decline in economic activity, in part because we’ve been relatively effective in restoring some confidence and stability.”

“The decline in bank lending has been more than offset by the increase in borrowing in the securities markets. Overall, we’re in a situation now where mostly what we’re seeing is a reduction in demand for credit as people improve their balance sheets -- save more, spend less -- less evidence of a substantial contraction in the supply of credit.”

“It would not be appropriate or prudent for us to infer from that sign of progress that we’re at the point where we can start to walk this stuff back, wind it back completely.”

GEITHNER ON SMALL BANKS:

“We’re a country of 9,000 banks, not just 20 banks. Fewer every day. But that’s sort of the necessary process of restructure and repair that we’re going through. And many of those banks came into this crisis with more capital than the big banks held, but many of them also had more concentrated exposure to commercial real estate and real estate.”

GEITHNER ON SUPPORT FOR FINANCIAL SYSTEM:

“Because of these early signs of progress in each area, we are now in a position to evolve our strategy as we move from crisis response to recovery, from rescuing the economy to repairing and rebuilding the foundation for future growth.

“As we enter this new phase we must begin winding down some of the extraordinary support we put in place for the financial system.”

GEITHNER ON RECOVERY:

“We still have a long way to go before true recovery takes hold. This Administration will keep at it until that happens. We know that millions of ordinary Americans are suffering through no fault of their own and their well being is the driving force behind every policy we enact and every dollar we spend.”

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