Geithner sees signs of financial healing
WASHINGTON - Declaring that the financial system was "starting to heal," Treasury Secretary Timothy Geithner said yesterday that major banks had raised $56 billion since stress tests showed several in need of more capital - a sign of emerging investor confidence.
Geithner also said a public-private program to rid institutions of their worst assets would be in place by July.
The hopeful assessment was laden with caution, however. Geithner warned the Senate Banking Committee that he would not discuss an "exit strategy" for the government's $700 billion intervention in major private sector institutions.
"It's not quite time yet," he told Senator Richard Shelby, a Republican of Alabama.
Confronting anxiety among both Democrats and Republicans, Geithner said that resolving the business entanglements of insurance conglomerate American International Group would take longer than envisioned.
And he disputed Republican assertions that bank repayments of government infusions cannot be used for further assistance to the financial system.
All in all, senators from both parties voiced skepticism about the degree to which the Treasury has intervened in companies and about what it has done or failed to do with the leverage it has gained over those firms. Such doubts are surfacing as Geithner and the Obama administration prepare to seek congressional action on a financial regulatory overhaul, with some urging quicker action.
In a recurring line of questioning, committee chairman Christopher Dodd, a Connecticut Democrat, asked Geithner why major AIG creditors, which include Goldman Sachs and Merrill Lynch, had been permitted to recoup the entirety of their investment in the company. The government has injected $70 billion into AIG and owns about 80 percent of its assets.
Geithner said the administration didn't have the authority to extract such concessions from AIG creditors.
In written testimony provided to the committee, Geithner said that of the $56 billion raised by the nation's biggest banks since they underwent stress tests, $48 billion had been raised by banks deemed in need of additional capital. That puts them nearly two-thirds of the way to their government-imposed goal of $75 billion in new capital.
