Treasury Secretary Timothy Geithner said Thursday the government's $700 billion bailout program will end "as soon as we can," and that part of it will be used to lower the soaring federal debt.
During a sometimes contentious Joint Economic Committee hearing that included one lawmaker calling on him to resign, Geithner was pressed to disclose the administration's plan for dealing with the unpopular financial rescue program.
"We are winding it down and will close it as soon as we can," Geithner said of the $700 billion bailout fund, known as the Troubled Assets Relief Program. Congress approved TARP at the height of the financial crisis in October 2008 as a way to supply banks with fresh capital.
Geithner said "substantial resources" remaining in the fund would be used to pay down the national debt, which is being pushed higher by record deficits including a $1.42 billion imbalance for the budget year that ended Sept. 30. Even hundreds of billions of dollars would be a tiny fraction of the $12 trillion debt, but it could lessen political unhappiness if portions of the bailout program are allowed to continue.
While pledging to end TARP as quickly as possible, Geithner also said the administration did not want to repeat the mistake of other countries by ending government support too fast and derailing a fledgling economic recovery.
But Rep. Kevin Brady, R-Texas, said the economy was such a mess that Geithner, as the Obama administration's chief economic spokesman, should resign immediately.
"Mr. Secretary, the public has lost all confidence in your ability to do your job," Brady said.
Geithner, who headed up the New York Federal Reserve Bank before being tapped by Obama to be Treasury secretary, countered that the economy was in significantly better shape today than it was a year ago when Republicans controlled the White House, a view that was supported by a number of Democrats on the committee.
Democratic Sen. Charles Schumer of New York did criticize Geithner for not pressing China forcefully enough to allow its currency to rise in value against the dollar. American manufacturers blame a significant portion of the U.S. trade deficit with China on an undervalued yuan, which makes American products more expensive in China and Chinese goods cheaper in America.
"Today millions of Americans are out of work because the Chinese are manipulating their currency," Schumer said, urging the administration to impose trade sanctions on Chinese products if the Chinese government did not stop controlling the value of the yuan.
Geithner said the Chinese government has indicated that it plans to allow its currency to be set by market forces and he predicted that it would not be long before China resumes allowing the yuan to rise in value.
Geithner was on Capitol Hill pushing Congress to move quickly in overhauling the nation's badly flawed financial rules, which he says is essential for the health of the economy.
"To ensure the vitality, the strength and the stability of our economy going forward, we must bring our system of financial regulation into the 21st century," Geithner testified.
The House Financial Services Committee and the Senate Banking Committee are working on their own versions of sweeping financial overhaul plans, but the two panels are taking divergent approaches in some areas.
Both proposals also face sharp opposition from major sectors in the financial industry, casting doubt on how quickly Congress will be able to reach agreement and send a finished bill to the White House.
Geithner said the administration wants to ensure that firms won't be able to escape or avoid oversight by shopping for the most lenient regulator, a situation critics say contributed to the worst financial market crisis in seven decades.
"The fact that investment banks like Bear Stearns or Lehman Brothers or other large firms like AIG could escape meaningful consolidated federal supervision simply by virtue of their legal form should be considered unthinkable from now on," Geithner said.
The administration also wants to see Congress work to ensure that the financial system as a whole is more capable of absorbing shocks and coping with failures. That will require putting a greater focus on the quality of capital that firms are allowed to hold, Geithner said.
Capital reserves are the cushion financial firms carry to absorb loses.