Plan for financial sector postponed

Bloomberg News / February 9, 2009
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WASHINGTON - Treasury Secretary Timothy Geithner has postponed his unveiling of the administration's plan to shore up the financial industry as officials focus on getting approval for their separate economic stimulus plan in the Senate.

"The Senate votes on Monday, and economic officials administration-wide will be working and consulting with senators throughout the day," the Treasury said in an e-mailed statement yesterday. "Secretary Geithner will postpone the release of the administration's Financial Stability and Recovery Plan until Tuesday to allow for that to happen."

President Obama has said the stimulus is needed to avert a deeper recession, and he wants a bill on his desk by Feb. 16. A key procedural vote on the Senate's $780 billion measure is scheduled for today, with a final vote to take place tomorrow. The Senate measure must then be reconciled with an $819 billion plan the House approved last month.

"There's a desire to keep the focus right now on the economic recovery program, which is so very, very important," Lawrence Summers, director of the National Economic Council, said on ABC's "This Week." "If there was ever a moment to transcend politics, this is that moment."

Competing House and Senate versions of the measure are more than 90 percent in agreement, Summers said on the "Fox News Sunday" program.

He said Geithner's proposal will stabilize the banking system and increase the flow of credit.

"The focus is going to be on increasing the flow of credit and doing it with transparency, with accountability for those who receive support, and with a kind of consistency that, frankly, we haven't seen so far," he said. "There will be support for banks so that they remain stable, and are in a position to lend."

He also told Fox that private investors may be asked to play a role in reviving ailing banks.

"With the right strategic approaches, Secretary Geithner believes that we can bring in substantial private capital, and that's something we all ought to be able to agree on, that where we can catalyze private capital, that's a better root to solving this problem than government resources."

Summers didn't rule out the administration's coming back to ask for more Troubled Asset Relief Program money, saying "we'll see what happens."

The first part of the TARP has so far provided almost $400 billion to more than 360 banks.

The stimulus package is just a part of what it will take to pull the economy out of the 14-month-old recession. The stimulus will be effective only if credit markets, currently frozen by illiquid assets clogging banks' balance sheets, begin to function again.

A report last week showed the US unemployment rate jumped to 7.6 percent in January, the highest since 1992.

Gross domestic product contracted at a 3.8 percent annual rate in the fourth quarter, the most since 1982.

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