WASHINGTON: Most US banks have enough capital to keep lending but a pile of bad debts is fostering doubts about their health and slowing a recovery Secretary Timothy Geithner said on Tuesday.
Testifying before the Congressional Oversight Panel, which monitors the Treasury's efforts to bail out troubled banks, he said toxic assets were "congesting" the US financial system and hindering efforts to get credit flowing normally.
"Uncertainty about the value of legacy assets is constraining the ability of financial institutions to raise private capital," Geithner said, adding that he hoped a public-private investment program will improve the ability to put a price on troubled mortgage and other assets.
Earlier, the special inspector general for the government's bailout effort said the toxic-asset plan offered opportunities for fraud and abuse and warned it should be bolstered by tough conflict-of-interest rules.
Neil Barofsky also said subsidies for the public-private partnerships to buy assets could expose taxpayers to higher losses without matching increases in the potential for profit. He called for tough screening of investors as well as forced disclosure of ownership stakes and any dealings by the funds.
The government has injected hundreds of billions of dollars into banks to help them weather the damage from bad mortgage loans and is running stress tests on 19 of the largest banks to see whether they are prepared to deal with a further downturn.
In a letter to panel chairman Elizabeth Warren, Geithner said the Treasury still has about $134.5 billion available out of an originally approved $700 billion for bolstering banks' capital and said he wouldn't need to ask Congress for more.
STOCKS GET A LIFT
"Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators," Geithner said, a comment that gave stocks a lift in morning trading.
But he conceded there were persistent worries about the health of the banking system and said that was impeding a broader economic recovery.
"Concerns about economic conditions -- combined with the destabilizing impact of distressed 'legacy assets' -- have created an environment under which uncertainty about the health of individual banks has sharply reduced lending across the financial system," he said.
http://economictimes.indiatimes.com/News/International_Business/Most_US_banks_have_adequate_capital_Geithner/articleshow/4432484.cms
Testifying before the Congressional Oversight Panel, which monitors the Treasury's efforts to bail out troubled banks, he said toxic assets were "congesting" the US financial system and hindering efforts to get credit flowing normally.
"Uncertainty about the value of legacy assets is constraining the ability of financial institutions to raise private capital," Geithner said, adding that he hoped a public-private investment program will improve the ability to put a price on troubled mortgage and other assets.
Earlier, the special inspector general for the government's bailout effort said the toxic-asset plan offered opportunities for fraud and abuse and warned it should be bolstered by tough conflict-of-interest rules.
Neil Barofsky also said subsidies for the public-private partnerships to buy assets could expose taxpayers to higher losses without matching increases in the potential for profit. He called for tough screening of investors as well as forced disclosure of ownership stakes and any dealings by the funds.
The government has injected hundreds of billions of dollars into banks to help them weather the damage from bad mortgage loans and is running stress tests on 19 of the largest banks to see whether they are prepared to deal with a further downturn.
In a letter to panel chairman Elizabeth Warren, Geithner said the Treasury still has about $134.5 billion available out of an originally approved $700 billion for bolstering banks' capital and said he wouldn't need to ask Congress for more.
STOCKS GET A LIFT
"Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators," Geithner said, a comment that gave stocks a lift in morning trading.
But he conceded there were persistent worries about the health of the banking system and said that was impeding a broader economic recovery.
"Concerns about economic conditions -- combined with the destabilizing impact of distressed 'legacy assets' -- have created an environment under which uncertainty about the health of individual banks has sharply reduced lending across the financial system," he said.
http://economictimes.indiatimes.com/News/International_Business/Most_US_banks_have_adequate_capital_Geithner/articleshow/4432484.cms
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