Geithner Outlines Revised Financial Rescue
LINDA WERTHEIMER, host:
We have news this morning on the Obama administration's plans to support the nation's ailing banking system. Treasury Secretary Timothy Geithner offered details earlier this hour. NPR's Scott Horsley is covering this story, and he joins us now live.
Scott, this was billed as comprehensive, a comprehensive financial stability plan. What is the secretary proposing?
SCOTT HORSLEY: The secretary is proposing what he called a fundamental reshaping of the administration's bank rescue efforts, and it has several parts to it. One is more capital injected into the banks to help them weather the economic downturn. That's on top of the hundreds of billions of dollars that the government has already committed to the financial institutions. Secondly, to expand the program that was announced last fall, but has yet to take effect to promote consumer credit, student loans, bank loans, that sort of thing.
And then, finally, a program to get those toxic assets off the balance sheets of the banks that have been clogging up their balance sheets and making it hard for them to lend money. This was, of course, the original goal of the TARP program that was passed by Congress last fall, and then it wound up - the government wound up going in a different direction. So Secretary Geithner wants to return to that, and he says that's an effort that could ultimately cost a trillion dollars.
WERTHEIMER: What did he leave out of the plan, that he thought might be in it?
HORSLEY: Well, one thing that the administration has promised to do as part of the financial recovery is to help struggling homeowners that are in danger of foreclosure. Remember, it's the spike in foreclosures that have caused a lot of the problems with the mortgage-backed securities and made it tough for the credit markets. Secretary Geithner promised, again, that that foreclosure relief plan or foreclosure prevention plan is coming, but it's still a few weeks away. So that's the sort of missing piece of the plan that we're still waiting to see the details of.
WERTHEIMER: Now the government's bank rescue plans so far have been very unpopular with both lawmakers and the public, the sense that the banks have squandered the money or used it irresponsibly. Is this proposal likely to fare any better?
HORSLEY: Well, it was interesting. The secretary was introduced today by Senator Chris Dodd, who, of course, chairs one of the relevant committees. And he's going to have to maintain the support from the relevant lawmakers. But the lawmakers have been unhappy and the public's been unhappy with the sense that all this federal money has gone to the banks, and it hasn't helped homeowners and it hasn't gotten credit flowing again. So Secretary Geithner has promised that the - they will keep their eye on the ball. They will not be helping banks for banks' own sake, but they will try - to actually get that credit flowing again. And he also promised a greater degree of transparency and accountability.
Secretary TIMOTHY GEITHNER (Department of Treasury): We believe that access to public support is a privilege, not a right. When our government provides support to banks, it is not for the benefit of banks. It is for businesses and families who depend on banks, and it's for the benefit of the country.
WERTHEIMER: Scott, this package comes with a lot of warning labels, some very frightening ones, it seems to me. He said this involves large numbers, very large numbers. It will cost money. It will involve risk. It will take time. We will make mistakes. Things will get worse. Things will not work.
HORSLEY: He says we'll have to try things we've never tried before, yes. I mean, the government is in uncharted territory, here. But at the same time, he said as much as President Obama has said about the economic stimulus package: The alternative, to do nothing, is even more dangerous.
WERTHEIMER: Thanks very much.
HORSLEY: My pleasure, Linda.
WERTHEIMER: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.
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