Officials aim to refine bailout effort
WASHINGTON - Treasury Secretary Timothy Geithner met with top government officials yesterday to refine the administration's plan for overhauling the $700 billion bailout program and improve regulation of the financial system.
The administration is working on proposals for how it will use the last $350 billion from the rescue program. But the measures being considered could end up costing taxpayers hundreds of billions of dollars beyond the original $700 billion.
Geithner previously said the administration is weighing the possibility of using a bad bank to buy up toxic assets that are weighing on the books of financial institutions.
However, some suggested yesterday that the administration may be reexamining that idea because of the costs of such an approach.
Senator Charles Schumer, a New York Democrat, said the issue of how much more money to ask Congress to commit beyond the current $700 billion is a key item the administration is debating.
"Do you guarantee the bad assets or do you buy them? Do you guarantee all the bad assets or just the housing assets? There are a lot of unanswered questions," Schumer said.
Geithner met throughout the day with senior Treasury Department officials and had a meeting with Federal Reserve chairman Ben Bernanke, Federal Deposit Insurance Corp. chairwoman Sheila Bair, and John Dugan, the head of the Office of the Comptroller of the Currency.
The comptroller regulates the country's biggest banks.
Meanwhile, congressional auditors released a report saying it may never be known whether the initial $700 billion plan accomplished its objectives because it will be difficult to separate the impact of the rescue program from the effects of other economic forces.
The Government Accountability Office said the Treasury had made progress in implementing about half of the nine reforms it suggested in an earlier report, including improving communication about the bailout and hiring more staff to run it.
But the department had not fully addressed eight of the recommendations, according to the GAO.
Treasury spokesman Isaac Baker said President Obama and Geithner both agree that "much more needs to be done to better stabilize our financial system and get credit flowing again to families and businesses."
In an e-mail responding to the GAO report, Baker wrote the administration would soon disclose an overhaul of the bailout program "that will increase lending and impose new measures to strengthen oversight, transparency, and accountability so that taxpayers know where and how their money is being spent and whether it's achieving real results."
Geithner said earlier this week that the administration would reveal its new proposals "relatively soon." Many expect decisions as early as next week.
The administration is trying to boost confidence that it can get control of the worst financial crisis to hit the country since the 1930s.
However, former Treasury Secretary Henry Paulson quickly committed the first $350 billion from the bailout program in an effort that so far has not yielded the expected results of stabilizing the situation and getting banks to resume more normal lending to consumers and businesses.
The bailout program has generated a huge amount of controversy. Critics charge that the Bush administration failed to impose enough restrictions on banks to make sure the billions they were receiving went to boost lending.