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February 11, 2009

Geithner Proposes Spending $2.5 Trillion to Aid Banks, Unfreeze Credit Markets
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Meanwhile, Treasury Secretary Timothy Geithner held a news conference
Tuesday where he was expected to outline the Obama administration’s plan
to revive the nation’s moribund financial system. But Geithner’s
presentation has been widely criticized for lacking key details on how
the government plans to proceed. The Chicago Tribune reported Geithner
offered up the functional equivalent of a plan without a plan. Geithner
proposed spending as much as $2.5 trillion to aid banks, unfreeze
consumer credit markets and stem the soaring foreclosure rate. Geithner
said the funds would come from the Treasury, private investors and the
Federal Reserve. Geithner essentially ruled out nationalizing any of the
nation’s major banks but said the government would take $500 billion of
bad assets off the books of American banks.

Tim Geithner: “Our plan will help restart the flow of credit. It will
help clean up and strengthen our banks. And it will provide critical aid
for homeowners and for small businesses. And as we do each of these
things, we will impose new higher standards for transparency and
accountability.”

Geithner also called for extending a Federal Reserve program aimed at
shoring up consumer lending to the troubled mortgage sector.

Tim Geithner: “As housing prices fall, demand for housing will increase,
and conditions will ultimately find a new balance. And you’re seeing
that happen in parts of the country today. But now we risk an
intensifying spiral in which lenders foreclose, pushing house prices
lower and reducing the value of household savings, making it harder for
all families to refinance."

Lawmakers in both parties said they were surprised and displeased by the
administration’s decision to wait another week or two before unveiling a
program to help struggling homeowners. Investors also expressed concern
about the lack of details in Geithner’s plan. The stock market plummeted
as Geithner began laying out his plan. The Dow Jones Industrial Average
ended up down nearly 400 points or 4.6 percent.



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