Published March 30, 2009

US has US$135b left for bank bailouts

Geithner will not say if it will ask Congress for more

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(WASHINGTON) US Treasury Secretary Timothy Geithner said yesterday that the government has about US$135 billion left for bank bailouts, but he refused to say whether it will ask Congress for more this year.

'We have roughly US$135 billion left of uncommitted resources. The rest is out the door,' he said on ABC-TV's This Week with George Stephanopoulos.

Mr Geithner said that the figure included 'a very conservative judgment about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession'.

Congress approved US$700 billion last fall for rescuing banks that got into trouble when the US housing boom crashed, but lawmakers and ordinary Americans are showing signs of becoming increasingly unhappy over the programme.

On NBC television's Meet the Press, Mr Geithner said that it was essential that the government step in to ensure that banks clean up their balance sheets, as it is doing so by promoting the establishment of public-private partnerships to rid banks of soured assets.

'We have two choices: we can leave it as it is, hope banks will earn their way out of this process over time, and I am certain that will create the risk of a deeper, longer recession,' he said.

'The classic lesson of financial crises is governments wait too late and that means more damage to the economy, higher deficits in the future and greater cost to the taxpayer,' he added. 'We're not prepared to take that approach.'

On the ABC programme, Mr Geithner would not specify whether he expects to ask Congress for more money this year, though he did not rule it out. 'The important thing is we are going to work with the Congress to make sure we have the resources needed to do this right.

'We have substantial resources, we're going to use them quickly, as carefully as we can . . . to get credit flowing again and we'll cross that bridge when we come to it in terms of whether we'll need additional resources,' he added.

He conceded that US banks likely will need 'large amounts of assistance' before the credit crisis is resolved and said that it would be 'a mistake' to think that they can earn their way out of the current downturn. 'To get through this, governments need to act. There's a great obligation and responsibility for government to act to solve these things,' he said. 'The market will not solve this and the great risk for us is that we do too little, not that we do too much.'

Mr Geithner was making a lightning trip to Colombia yesterday to speak to the annual meeting of the Inter-American Development Bank, adding his voice to calls for institutions such as the International Monetary Fund to help counter the impact on emerging economies of the global financial downturn.

Meanwhile, support for the banking sector, increased public spending and extra funds for the IMF could enable the world economy to expand by the end of 2010, according to a draft G-20 communique published on the Financial Times website yesterday. Existing fiscal expansion will lift global output by more than 2 percentage points and create more than 20 million jobs worldwide, the report said. -- Reuters