Can Geithner take a punch?
Treasury Secretary Timothy Geithner does not look much like a boxer, but today he went toe-to-toe with the Congressional Oversight Panel and ducked their questions about the federal bailout of the financial system with a panache that would have made the great Muhammad Ali proud.
Geithner's testimony before the panel was peppered with as many warnings as most carnival rides. For instance, he said he "welcomed" banks who want to repay the money they received from the Troubled Asset Relief Program (TARP) early. Then, he argued that the Treasury will look at the impact of a bank's repayment on the supply of credit.
"It's important that we get a better capitalized financial system," Geithner said.
In his written testimony, Geithner argued that there were signs that the credit markets are thawing and that business confidence is rebounding. He even mentioned that most banks have adequate levels of capital. He also vowed to continue to have a transparent process, rebutting critics who claim the bailouts have been overly secretive.
Even so, problems remain. Geithner argued that the cost of credit is still very high.
"Reports on bank lending show significant declines in lending for consumer loans and for commercial and industrial loans, although mortgage refinancing has picked up considerably," he said.
Indeed, financial institutions, including Bank of America Corp. (BAC), are reporting better-than-expected quarterly earnings. Investors are not impressed. In fact, Connecticut Treasurer Denise Nappier is withholding support for the bank's CEO, Kenneth Lewis, at next week's board election.
About $135 billion of the $700 billion appropriated by Congress for the bailouts is still available for bank rescues.
"The total includes about $590 billion that has been allocated so far for various TARP activities, leaving $110 billion remaining," Bloomberg News notes. "Also, the Treasury expects $25 billion in repayments this year, leading to the total projection of $135 billion available."
Who exactly is rescuing whom here?