(CNSNews.com) – In his first appearance before the panel overseeing the Troubled Asset Relief Program (TARP), Treasury Secretary Timothy Geithner was pressed for answers on whether the government will allow banks to repay the TARP money and whether the government plans to become a voting shareholder in bailed-out firms.
Geithner was asked repeatedly by the panel’s Republican members -- Rep. Jeb Hensarling (R-Texas) and former Sen. John Sununu (R-N.H.) -- to provide details on whether Treasury plans to convert its non-voting shares into voting – or common – shares of stock in major bailed-out banks.
Geithner said only that Treasury wants to ensure that banks are adequately capitalized, and that stock conversion was one of many ways to do that.
“What we want to make sure of is (that banks have) the capital the system requires and that it is targeted to where it is needed,” Geithner said. “There’s a variety of different ways they can raise that capital. They’ll have the choice to raise it in the market, they’ll have the choice to do a conversion, and they’ll have the choice to take it (directly) from the government.”
Geithner was also asked whether Treasury would take back TARP money if major banks, some of whom have recently reported large profits, offered to repay the government.
Geithner would not commit to allowing the money’s return. He said that while he would like to see taxpayers repaid, their were broader systemic issues at play.
“Ultimately we have to look at two things -- one is, do the institutions themselves have enough capital to be able to lend? And does the system as a whole -- is it working?
“But of course, nothing would make me happier,” than to take TARP money back, Geithner added.
The Treasury chief did point out that his main criteria in deciding whether to accept returned TARP funds would be the overall health of the financial system, not of the individual banks.
“The critical thing here is whether the system as a whole is in a position where it has the capacity to support the credit that (economic) recovery requires, that’s the ultimate test.”
Harvard law professor Elizabeth Warren, the chair of the Congressional Oversight Panel, opened the hearing with harsh words for Geithner, telling the Treasury chief that the American people want things explained clearly and honestly, so they can make sure their money isn't being used to shield bankers from their own mistakes.
“People want to see action described in terms that make sense to them and want to see that taxpayer funds aren't being used to shield financial institutions from the consequences of their own behavior,” Warren said.
But when Geithner was asked to provide details of new financial industry regulations and consumer protections, he merely assured the panel members that new regulations were on the way.
“We will be outlining in the next couple weeks a set of detailed proposals for how to change the basic framework of consumer protection, and you’ll see, following that, we’ll lay out the broader changes to the oversight framework that we think are necessary to make these new rules of the game work,” Geithner said.
Rep. Jeb Hensarling (R-Texas), the only member of Congress appointed to serve on the oversight panel, told CNSNews.com that he was “unimpressed” with the Treasury Secretary’s lack of detail, saying that he would like to hear more from the man running the nation’s bailout.
“What I didn’t hear was any details or policies to actually implement (Treasury’s) goals,” Hensarling said, “so I continue to have a high level of concern.”
Geithner, meanwhile, for the fifth time Tuesday, refused to answer questions from CNSNews.com after testifying at a hearing.
Created by the Emergency Economic Stabilization Act -- the law that authorized the nation’s bank-bailout program -- the oversight panel is not a congressional committee at all, but it does have the authority to review all data pertaining to the TARP and make reports to Congress based on what it finds.
Tuesday’s hearing was the first time an official from the Treasury Department has appeared before the oversight panel.