- The Washington Times - Friday, September 25, 2009


A senior Treasury Department official told Congress on Thursday the government’s $700 billion Wall Street rescue has been a success but didn’t hint when the bailout will end, leading to speculation the agency may seek an extension beyond the program’s scheduled end-of-year expiration.

“We still have a long way to go before true economic recovery takes hold, but there’s little doubt that we have moved back from the financial brink and toward economic recovery,” Assistant Treasury Secretary Herb Allison Jr. told the Senate Banking, Housing and Urban Affairs Committee.

Mr. Allison, who oversees the one-year-old Troubled Asset Relief Program (TARP), didn’t say whether he would seek to extend the program when it expires.

The rescue plan is credited in part with saving the financial sector from near collapse last year. But since much of its money has been used to assist the same institutions blamed for the financial crisis, the program has generated many critics on and off Capitol Hill.

The program’s infusions of money into the auto industry also has grated the public and many in Congress.

TARP’s government watchdog, Special Inspector General Neil Barofsky, told the Senate panel Thursday that Treasury has failed to exert proper transparency in the program, particularly on how recipients of TARP funds are spending the money.

“Taxpayers really want to know, and should have a right to know, what’s going on with their investment,” he said.

Mr. Barofsky added that it was “extremely unlikely” that the taxpayer will see a full return on its TARP investment.

Treasury so far has set aside $644 billion in TARP money, of which $444 billion has been committed to specific programs.

Banking committee Chairman Christopher J. Dodd warned that overall reforms are needed in the financial services industry in order to avoid future economic crises.

“Are any of us glad that we had to spend this money? Absolutely not,” the Connecticut Democrat said. “The 20th-century regulatory structure has been outpaced by the 21st-century innovations in the financial services industry, and if we don’t fix it, we could be right back where we were a year ago.”

Sen. Richard C. Shelby of Alabama, the committee’s top Republican, said he is opposed to extending TARP because it “did not address many of the core problems of our financial markets.

“We gave the administration the massive check it requested, added some oversight provisions and moved on,” he said. “A more deliberate process would have yielded a better understanding of the crisis and the need for particular actions.”

Mr. Allison told the panel that declining commercial real estate prices may continue to weigh down bank balance sheets and prolong the current recession.

“The use of these programs, by design, will decline as the financial system recovers,” he said. “But we must remember that our economic recovery has just begun, and significant parts of the system remain impaired.”

The government’s $700 billion Troubled Asset Relief Program will expire at the end of the year unless an Congress approves an extension.

“This program ends either the end of this year or no later than next year,” he said.

On the other side of the Capitol, Rep. Paul W. Hodes, New Hampshire Democrat, lead a bipartisan group of 28 House members Thursday urging Treasury Secretary Timothy F. Geithner not to renew TARP, saying that the program has been plagued by waste and poor oversight.

“This program to bail out banks on the backs of working families across the country is not the best way to help our economy, or a good use of taxpayer dollars,” said the lawmakers in a joint letter to Mr. Geithner.

Despite Treasury’s cautious outlook of the economy, the agency already has begun to wind down several TARP initiatives, and promises to close out the program as quickly as possible without harming the economy.

The Federal Reserve also said Thursday that it was scaling back two emergency lending programs as the economy improves, the Associated Press reported.

The Fed will reduce the amount of money available to banks in short-term loans under a program called the Term Auction Facility, or TAF. For 84-day loans, the Fed will provide $50 billion in loans in October and $25 billion each in November and December.

The total for the TAF loans, which offer an interest rate of 0.25 percent, peaked at $150 billion in June.

The Fed also said it was cutting back on a program in which investment firms can temporarily swap risky securities for “super-safe” Treasury securities. The Fed says $50 billion worth of Treasury securities will be made available for October, down from the current $75 billion. Operations in November and December will be trimmed to $25 billion each.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide