Obama believes China manipulates its currency says Geithner. To this I can only say Good Morning Mr. Obama. Good Grief!
Banks getting money from the government’s $700 billion bailout fund will have to explain in detail what they are doing with the money, the incoming head of the Treasury Department said Thursday in written responses to questions from the Senate Finance Committee.
Timothy Geithner’s nomination to be Treasury Secretary was approved by the committee on an 18-5 vote on Thursday. The full Senate will now take up Geithner’s nomination, probably not before next week.
The ranking Republican on the committee, Sen. Charles Grassley of Iowa, voted against Geithner in the committee because he hadn’t paid all of his income taxes until reminded to do so by IRS auditors and the Obama transition team. “The Treasury Secretary is in charge of the IRS, and must set a good example,” Grassley said.
In a 102-page letter responding to questions from the panel, Geithner said would require banks to report quarterly on their overall lending activity in a “detailed and timely” manner as a condition for receiving the capital infusions from the government.’
The Treasury will issue a new quarterly report on lending and credit conditions in the United States, Geithner said.
Geithner said Treasury will require that banks provide information publicly about the value of each government investment, all of which is expected to be posted on the Treasury Department’s website.
The agency is also looking at other possible proposals to stabilize the economy, including one that would employ Fannie Mae and Freddie Mac to offer new mortgages with subsidized rates as low as 4.5%.
He sidestepped questions about whether the Treasury Department would consider creating a government-backed institution that would buy and hold banks’ bad mortgage securities, a prospect many regulatory onlookers have speculated he is contemplating. “I am considering a range of ideas and initiatives to restore stability to the financial system,” Geithner said.
He also rejected the idea that the Treasury Department would consider nationalization of financial institutions. “Encouraging private investment in our banks and drawing private capital that is now on the sidelines is critical to ensuring that our financial institutions are stable and that our capital markets can return to more normal and healthy functioning,” Geithner said.
In addition to monitoring banks’ activities, Geithner said the Treasury Department will require banks to increase lending above baseline levels, but he did not provide details about what that minimum threshold might be. “I intend to make sure that the … funds are used to promote new lending activity, to implement aggressive measures to address the foreclosure crisis, in addition to stabilizing financial institutions,” he wrote.
However, Neil Barofsky, the bank bailout fund’s inspector general, said in a letter Thursday that he is requesting that participating banks provide his office details about how they are using the funds from documents that have been certified by senior executives. Barofsky also said he is requesting in writing a description of plans executives have for complying with new CEO pay package restrictions.
Geithner also said he was committed to using between $50 billion and $100 billion of the remaining bank bailout funds in programs set up to alter mortgages of troubled homeowners in an attempt to mitigate foreclosure.
He also said he supports “reforming our bankruptcy laws,” indicating that he is endorsing legislation in Congress that would give bankruptcy judges the authority to alter mortgages in an attempt to stave off foreclosure. House Speaker Nancy Pelosi said Thursday she would give high priority to the bankruptcy measure and could include it as part of a fiscal stimulus package expected to be approved within weeks.
Sen. Charles Grassley, R-Iowa, said in his comments that he was disappointed with the level of disclosure regarding the government’s involvement in both the Bear Stearns deal in March and its $150 billion taxpayer bailout of American International Group (AIG) . “It appears that the reported valuation of those assets may be overstated,” Grassley said.
Grassley also said he was concerned about a section of AIG’s marketing material that says the “actual debt to be repaid,” is $39 billion with the federal government removing any obligation for the company to repay about $110 billion. Geithner said he and the New York Fed would need to “look more carefully” at AIG’s marketing material before responding.
China‘s currency policy
President Barack Obama believes that China is manipulating its currency, Geithner said, which would be sharp change from previous administration’s China policy. “President Obama has pledged as president to use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices,” Geithner said in response to a written question from Sen. Charles Schumer, D-N.Y.
As a senator from Illinois, Obama co-sponsored legislation that would overhaul the U.S. process for determining currency manipulation. The legislation would authorize new enforcement measures against manipulators. Geithner said Obama’s economic team is working on a strategy to achieve currency realignment.
“China cannot continue to get a free pass for undermining fair-trade principles,” Geithner added.