Treasury secretary: Wall Street rescue fund not permanent
WASHINGTON -- The Treasury intends to use bank repayments of government aid to continue assisting the financial sector, Treasury Secretary Timothy Geithner told lawmakers Thursday even as he assured them the $700 billion rescue fund would not become a permanent financial bailout tool.
"We're still in a very challenging economic and financial situation," Geithner said.
Republican lawmakers have argued that Geithner should use the repayments toward reducing the federal debt.
But Geithner reminded members of a House Appropriations subcommittee Thursday that the rescue fund law, as adopted by Congress last fall, automatically ends Dec. 31. The law gives the Treasury secretary the authority to extend it only nine more months.
"So it is not a permanent program," he said.
The hearing before the subcommittee was intended to give Geithner an opportunity to discuss the Treasury's 2010 budget request. But lawmakers' questions focused largely on his work dealing with the financial crisis, including what role the government could play in assisting money-strapped states such as California.
Geithner said he did not have authority to use the financial rescue funds to help state and municipal governments. But he said he was working with Congress to make it easier for state and municipal governments to borrow money.
"The primary burden is going to rely on governors and mayors to try to make sure that they're taking the steps necessary to bring their deficits down," he added.
But Geithner declined to rule out helping California or other states with taxpayer money.
"That's not putting on the table or taking off the table any specific thing like that," he said. "But I just want you to know that there are things that we've had to do I would never have contemplated doing."
Geithner also said the Obama administration is considering an independent agency that would set and enforce financial services regulations to protect consumers.
Geithner said the administration is studying the structure and how much authority such an agency would have. His comments Thursday were the most specific acknowledgment yet that such an entity could be part of the Obama administration's broader effort to overhaul financial sector regulations.
The head of the Securities and Exchange Commission has objected to a watchdog that would chip away at the SEC's powers.
Geithner told House members that the administration is looking at how a consumer protection agency would relate to "authorities that exist across agencies now."
Three Democratic sponsors of House legislation creating an independent commission on financial products wrote Geithner a letter Thursday urging him to include such an agency in his regulatory overhaul plan.
"Deceptive and dangerous financial products have already devastated millions of individual families," the letter stated. It was signed by Reps. William Delahunt of Massachusetts, Brad Miller of North Carolina and Peter Welch of Vermont.
The Treasury's $13.4 billion budget request for fiscal 2010 represents a 5 percent increase over current spending. In prepared remarks to the House panel, Geithner said the majority of additional money he is seeking for his department will be devoted to improve tax collection efforts.
Geithner told a House appropriations subcommittee that $332 million would go to new enforcement by the Internal Revenue Service and $90 million to protect taxpayer records from Internet hackers.
The enforcement emphasis means that tax returns -- particularly those from businesses and high-income Americans -- will face greater scrutiny in hopes of closing an annual $300 billion gap between taxes owed and taxes actually collected.