By Celia Canon- Talk Radio News Service

Secretary of the Treasury Timothy Geithner

Treasury Secretary Timothy Geithner testified on the financial situation and on the American Recovery and Reinvestment Act today.

Geithner said that “There are important indications that our financial system is starting to heal.”

Signs that we are on the right path include ”New securities issuance has started to revive, Spreads for AAA credit card receivables asset-backed securities (ABS) have fallen about 330 basis points from there peak. There has been more issuance of consumer ABS in the past two months than in the preceding five moths combines,” said Geithner.
loans of similar types, duration and interest rates.”

Starting with the subprime mortgage crisis in 2007, “Unexpected losses experienced by major banks on mortgage-back securities set off a vicious cycle” as Geithner describes.

As a result, the government implemented the American Recovery and Reinvestment Act (ARRA) in February 17, 2009.

The act provides transparency and accountability so that taxpayers know where every dollar is going. Additionally, the ARRA “is giving 95% of working Americans a tax cut, creating or saving 3.5 million jobs, providing nearly 4 million students with a new higher education tax and helping 1.4 million Americans purchase their first home by providing $6.5 in tax credits,” said Geithner.

In terms of lending, which was significantly cut as banks lost their capital, Geithner said “The recovery program included any substantive increasing guarantees and a reduction in fees for small businesses lending programs, and we’ve seen lending under those programs increase 25% since the Recovery Act was passed.”

Sen. Christopher Dodd (D-Conn.), Chairman of the Senate Banking Committee, mitigated these arguments by saying, “I think the picture remains mixed after losing some 5.1 million jobs since the recession began.”

Geithner concurred, and added “In many parts of the country, many people don’t feel it’s getting better yet, they don’t really feel that the availability of credit is improving.”

“Treasury is continuing to look into additional metrics that gauge the markets more broadly, as well as additional economic metrics, to determine the effectiveness of the current strategy and whether additional or different steps are needed,” Geithner said.

Peter Wallison of the American Enterprise Institute says that Congress would not have prevented the subprime mortgage crisis if regulatory agencies had acted according to expectations in order to protect the American Dream. (0:44)

 

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The Center for Capital Markets Competitiveness met to discuss whether the regulatory structure of capital markets is outdated. Participating speakers agreed that the current regulatory system is in need of modernization to deal with changing markets but disagreed over what that modernization entailed. Eugene Ludwig, the founder of Promontory Financial Group, LLC, suggested that a system that enforces less while equally regulating large and small institutions is needed. Ludwig said that power is moving to favor large institutions and that this movement was not the intention of the founders of the United States. (more…)

Frank Alexander, a law professor at Emory University, describes that HR 5818 focuses on neighborhoods and the innocent victims of home foreclosures and vacancies, not on foreclosure prevention like the stimulus package under consideration in the Senate. (0:54)

 

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At a Domestic Policy Subcommittee of the House Oversight and Government Reform Committee hearing on the impact of the subprime mortgage crisis on neighborhoods, Chairman Dennis Kucinich (D-Ohio) says that while “the meltdown of subprime lending has been a genuine tragedy” for individuals, the “totally blameless victims” are the neighborhoods affected by vacant and abandoned property.  Kucinich lists the repercussions of abandoned properties, including falling property value, loss of rental units, rise in crime, and loss in tax revenue. (1:00)

 

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