Treasury Secretary Timothy F. Geithner said credit availability is improving and companies are building up unprecedented cash reserves, signs that the U.S. economy continues on a path of increased growth.
Further, the Secretary claimed on Tuesday that the government’s management of the $700 billion Troubled Asset Relief Program has yield the desire results while costing much less than originally estimated. The unpopular program he claims “played a critical role” in loosening access to credit and putting the economy back on a solid footing.
“Credit conditions overall, which dragged our economy into a deep recession in 2007, no longer pose an obstacle to growth,” Geithner said in his testimony to the Congressional Oversight Panel. Geithner pointed to U.S. firms that are now raising money in capital markets “and have built up record cash reserves, which will eventually be reinvested and fuel growth.”
The TARP program was criticized by both Democratic and Republican lawmakers as favoring Wall Street over small businesses. Many thought the government would likely lose all of the $700 billion lawmakers had allocated to rescue large banks as well as several U.S. automakers and housing loan backers.
Surprisingly, the cost to taxpayers has now plummeted to $105 billion at last estimate, down from an estimate of $341 billion in August. And it seems now that the benefits have thus far continued to outweigh the cost of the program.
Congress authorized TARP in October 2008 to prevent a collapse of the U.S. financial system. Against the predictions of many, companies like Goldman Sachs Group Inc. (NYSE:GS) and Bank of America Corp. (NYSE:BAC) that borrowed funds have since repaid the government with interest. Additionally because of the return to more palatable market conditions, Geithner said the Treasury plans to sell the remainder of its stake in Citigroup Inc. (NYSE:C) in an “orderly fashion” by year end, further reducing the overall cost of the rescue program.
In additional good news, prospects for the government’s investments in the auto industry have improved, and the Treasury plans to begin to recover its stake in General Motors Co. after the company has an initial public offering later this year or in 2011.
Losses from government investments in GMAC Inc. “will be less than forecast last year,” the Secretary said.
Geithner said the Obama administration doesn’t plan to extend TARP past its Oct. 3 expiration and called Tuesday’s hearing “a eulogy” for the program.
The TARP loans “did what they were supposed to do,” Geithner continued. The economy wouldn’t have started to rebound “without the dramatic actions we took, however unpopular, to bring down the cost of credit and stabilize the system.”