Bailout Winding Down, Things Looking Up
NEW YORK (
) -- Treasury Secretary Timothy Geithner bolstered the idea that things might finally be getting better.
In Congressional testimony on Thursday, Geithner said the government won't need additional funds to stabilize the financial markets after all. President Barack Obama's economic team has removed a $750 billion line item from the federal budget projections, since "that money is unlikely to be necessary," Geithner said.
Nearly two dozen banks have repaid over $70 billion in funds from the Troubled Asset Relief Program implemented last year, including
JPMorgan Chase
(JPM) - Get Report
,
American Express
(AXP) - Get Report
,
Goldman Sachs
(GS) - Get Report
,
Morgan Stanley
(MS) - Get Report
,
Capital One
(COF) - Get Report
,
BB&T
(BBT) - Get Report
and
US Bancorp
(USB) - Get Report
. Geithner estimates another $50 billion in repayments over the next 12 to 18 months from banks still under the TARP, like
Bank of America
(BAC) - Get Report
,
Wells Fargo
(WFC) - Get Report
and
Citigroup
(C) - Get Report
.
The Treasury chief also outlined for lawmakers all the ways various agencies have been scaling back bailout programs and said taxpayers have gotten decent returns on many of its financial-sector investments.
Earlier on Thursday the FDIC
confirmed that its debt-guarantee program is set to expire on Oct. 31. The
Federal Reserve
has slashed its multitude of liquidity programs by anywhere from 57% to 99% because the private market is providing its own liquidity once again.
The FDIC has so far banked over $9 billion in fees from its guarantee program. While the last guarantees won't expire until the end of 2012, no bank has required the FDIC to pay up so far. Geithner didn't quantify returns from the Fed programs, but said they "generated considerable income for the taxpayers with no significant losses."
Later this month, Treasury will halt its guarantee program for money-market mutual funds as well, which has earned more than $1 billion in income with no "direct cost" to taxpayers, Geithner said. TARP repayments have generated a 17% annualized return from stock-warrant repurchases and $12 billion in dividend payments from dozens of banks.
Still, while there are major signs of improvement, Geithner was careful to note that taxpayers are not yet out of the woods. The Treasury still has $180 billion directly invested in banks, not to mention other types of huge commitments to firms like
American International Group
(AIG) - Get Report
,
Fannie Mae
(FNM)
and
Freddie Mac
(FRE)
.
Additionally, banks still have huge mounds of debt going bad as unemployment, housing and consumer spending struggle to regain stability.
"Going forward, we must continue reinforcing recovery until it is self-sustaining and led by private demand," Geithner said in prepared remarks. "The classic errors of economic policy during crises are to act late with insufficient force and then put the brakes on too early. We are not going to repeat those mistakes."
-- Written by Lauren Tara LaCapra in New York
.
