Senators Press Geithner for More Details on Bailout
Thursday, February 12, 2009
As senior senators demanded more details yesterday about how the government's new financial rescue package will work, Treasury Secretary Timothy F. Geithner told them that the time he is taking to work out the specifics will make for a better plan and prevent missteps.
In the meantime, however, a federal banking regulator urged yesterday that financial firms under its purview suspend mortgage foreclosures until the Obama administration offers specifics of its program to help struggling homeowners. Treasury Department officials said this proposed initiative would be detailed within several weeks.
Geithner's assurances to Capitol Hill came one day after his rollout of the bailout program was met with dismay among lawmakers and investors because so much of it remained vague. Testifying before the Senate Budget Committee, Geithner defended his approach, which includes performing a stress test on major banks, setting up a public-private partnership to buy bad assets and expanding a program meant to jump-start lending.
"You've had now more than a month to work on the proposal," Sen. Jeff Sessions (R-Ala.) scolded him. "But what we've heard is more of an outline, short on details, about how we're going to fix this financial system."
Geithner explained that he would be better able to adapt the bailout to the preferences of Congress and the realities of the marketplace because he has yet to settle on the exact structure of the programs.
"I completely understand the desire for details and commitments, but we're going to do this carefully," Geithner told the committee. He said that could avoid putting the government in a position that "requires quick departures and changes in strategy."
Lawmakers and consumer advocates had been disappointed Tuesday by the delay in unveiling a $50 billion initiative to help homeowners facing foreclosure.
The Office of Thrift Supervision, which oversees a portion of the banking industry, has joined consumer advocates and some in Congress, including Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, in asking mortgage lenders to institute a moratorium on foreclosures until the Obama administration announces its program. OTS does not have the authority to force lenders to comply, but this could add pressure on officials to finalize the details of the plan quickly.
"OTS-regulated institutions would be supporting the national imperative to combat the economic crisis by suspending foreclosures until the new plan takes hold," John Reich, the agency's director, said in a statement.
OTS regulates more than 800 savings and loans across the country, including American Bank in Rockville and First Market Bank in Richmond.
Bob Davis, executive vice president for the American Bankers Association, said the temporary moratorium urged by OTS could be beneficial for lenders since the administration's plan may offer enhanced assistance to those that modify troubled loans. "I view this as a prudent reminder to banks that a new solution may be coming," he said.
ING Direct, one of the largest thrifts regulated by OTS, said it already has a moratorium in place for foreclosing on owner-occupied properties through the end of March. "We're not living under normal circumstances and we have to act differently and help everybody to get by as well as possible," said Cathy MacFarlane, a company spokesman.