(Adds comments on costs of resolving bank crisis)
WASHINGTON, Jan 31 (Reuters) - The White House’s top economic adviser Lawrence Summers gave some backing to Treasury Secretary Timothy Geithner on Sunday, saying Geithner deserves an “enormous amount of credit” for his strategy in stabilizing U.S. banks.
The comment, made on CNN’s “Fareed Zakaria GPS” program, provided a public White House endorsement of Geithner after a week in which the Treasury chief was vilified by members of Congress for his role in the 2008 bailout of American International Group’s (AIG.N) its subsequent payment of $62 billion in taxpayer funds to large banks.
After Geithner arrived at the Treasury a year ago, he launched a program to “stress-test” the top 19 U.S. banks to determine their capital needs. The tests, along with improvements in financial markets, helped pave the way for many of the institutions to sell shares to private investors.
“I think Secretary Geithner deserves enormous credit for directing the strategy that was about private sector capital raising, that was about stress-testing for transparency to build confidence,” Summers said on the program.
One Republican lawmaker asked Geithner to resign during a House of Representatives Oversight and Government Reform Committee hearing last week examining the AIG bailout and why the New York Federal Reserve under his leadership supported limiting public disclosures about the bank payments, which some have labeled a “back door bailout.”
The AIG matter will continue to be investigated by the panel and by the federal bailout program’s special inspector general.
Summers also said he believed that the ultimate cost to the federal government of the financial bailout programs — most recently estimated at around $141 billion, would be less as a percentage of U.S. economic output than the cost of resolving the savings and loan crisis in the 1980s and 1990s.
“The cost of resolving this banking crisis — the most serious in seventy years — because of the way it is being managed, looks like there’s going to be much less (cost) relative to the economy than the cost of the S&L crisis or the cost of crises in other countries. So I think you have to regard the approach as a very considerable success,” Summers said.
The Obama administration is expected to update its estimate of taxpayer losses from the Troubled Asset Relief Program on Monday with the release of its proposed fiscal 2011 budget.
The Federal Deposit Insurance Corp. in 2000 estimated the net taxpayer cost of resolving the S&L crisis from 1986 to 1995 at about $153 billion. (Reporting by David Lawder, editing by Maureen Bavdek)