Treasury Secretary Timothy Geithner faces a slew of questions this afternoon about his plans to shore up banks while a watchdog agency warns that Obama administration initiatives could increasingly expose taxpayers to losses. Geithner is scheduled to testify today before the Congressional Oversight Panel for the government’s $700 billion financial rescue program.
Meanwhile, the rescue program’s special inspector general concluded in a 250-page quarterly report to Congress that a private-public partnership designed to rid financial institutions of their “toxic assets” is tilted in favor of private investors and creates “potential unfairness to the taxpayer.” The government’s effort to stabilize the financial sector and unclog the credit markets has come under heavy scrutiny. Treasury officials say the Obama administration has been holding participants more accountable. Geithner sent key members of Congress six-page letters last week spelling out his department’s measures.
Still, Inspector General Neil Barofsky, using blunt language, offered a series of recommendations to protect the public and took the Treasury to task for not implementing previous advice. Overall, the report said the public-private partnership—using Treasury, Federal Reserve and private investor money—could total $2 trillion. “The sheer size of the program … is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives,” the report stated.
