Geithner: US Financial System Remains 'Badly Damaged'-US Lawmaker
February 07 2009 - 4:32PM
Dow Jones News
Treasury Secretary Timothy Geithner warned U.S. House Democrats
on Saturday that the U.S. financial system remains "badly damaged,"
but that the Obama administration planned to act both quickly and
aggressively to deal with the crisis, according to one lawmaker
present.
"He did say that some institutions are so frail that they would
not survive," said Rep. Brad Miller, a Democrat from North Carolina
and a member of the House Financial Services Committee.
Geithner spoke at the House Democrat's three-day policy retreat
in Williamsburg, Va., on Saturday. Miller said the secretary did
not offer specific details about the Treasury's plan to use the
second $350 billion of the financial rescue package, which is
scheduled to be announced midday Monday in a much-anticipated
speech by Geithner. His opening remarks were perhaps 10 minutes,
Miller said, and the speech was delayed five or 10 minutes while
Geithner spoke to President Barack Obama.
Instead of offering specifics, Geithner used the opportunity to
discuss his own background as well as the challenges facing the
U.S. economy. Miller said Geithner used the phrase "badly damaged"
to describe the financial system and stressed the need to address
the issue in one major policy push.
"He said it's clearly going to get worse but we have to act to
prevent it from getting much worse," Miller said.
Geithner used the opportunity to address the widespread anger
about the Treasury's use of the first $350 billion of the Troubled
Asset Relief Program, calling it "justified," according to Miller.
That acknowledgment, along with Geithner's recounting of his own
life story to open his speech, reassured lawmakers that he can see
beyond Wall Street's interests and deal with the economic plight of
average Americans, the House Democrat said.
"The concern has been that the Obama economic team has been
breathing rarefied air for so long that they've forgotten how
ordinary Americans think," Miller said.
Regarding the administration's plan to use the second half of
the TARP funds, Miller said Geithner's comments suggested the
details were still being finalized. He did acknowledge that a
portion of the plan will be used to stem foreclosures, including
what Geithner called "careful bankruptcy reform."
Miller, who has sponsored legislation opposed by the financial
services industry to allow bankruptcy judges to rework the terms of
mortgage loans, said he would wait to see what "careful" means, but
that he was glad that the administration is committed to dealing
with foreclosures.
The speech made it clear, Miller said, that the financial system
remains fragile.
"I don't think we know yet how bad the industry's insolvency
problem is," Miller said. "If we had regulators go in and examine
the books like we did at Fannie Mae and Freddie Mac a great number
of our systemically important financial institutions could be
insolvent."
-By Michael R. Crittenden, Dow Jones Newswires; 202-821-2159;
michael.crittenden@dowjones.com