Treasury Secretary Timothy Geithner unveiled a plan Feb. 10 to revive the struggling banking sector, thaw the credit markets, spark more lending to consumers and reverse a nationwide housing slump.
Geithner took the wraps off the Obama administration’s bank rescue plan shortly before the Senate passed an $838 billion economic stimulus plan. President Barack Obama is counting on both efforts to halt the worst economic downturn since the Great Depression.
Financial markets registered disappointment that the new plan lacked many key details. The Dow Jones Industrial Average was down 381.99 points Feb. 10 to 7888.88. The S&P 500 was off 42.73 to close at 827.16 points, the Nasdaq finished down 66.83 points to 1524.73. Oil was off $1.46 to $38.10 in after-hours trading as traders feared a falling demand as the economy worsens.
Speaking in the Treasury Department’s ornate Cash Room, Geithner said federal bank regulators would be empowered to conduct “stress tests” on big banks to determine their financial health.
These tests eventually could lead to bank closures to prevent their problems from worsening the economic contraction.
Geithner acknowledged there will be another round of capital injections into ailing banks.
The Bush administration injected almost $300 billion into 319 financial institutions, but the piecemeal effort has been heavily criticized for a lack of transparency and scant accounting of how the money was used.
The new Treasury plan will impose far more reporting requirements for new capital injections.
All the measures Geithner announced seek to restore dormant credit markets, public trust in the financial bailout process and investors’ confidence in turbulent financial markets.
“Instead of catalyzing recovery, the financial system is working against recovery,” he said. “And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it. It is essential for every American to understand that the battle for economic recovery must be fought on two fronts.”
(c) 2009 McClatchy-Tribune Information Services.
