Treasury Secretary Timothy Geithner said U.S. banks aren’t hurting their ability to lend as they repay the Troubled Asset Relief Program and back away from government assistance.
“By replacing the Treasury investments with private capital, banks have stronger capital positions, and will be in a better position to expand lending as the economy expands,” Geithner said Friday in Washington.
Recommended Stories
His comments come as the biggest U.S. banks are stepping up their efforts to escape TARP and its restrictions on executive compensation. Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. all took steps this month to sever ties with the bank rescue effort, raising questions about whether regulators should slow the escape process.
Geithner said the Obama administration would like to see banks relying on private investors as soon as possible. While he didn’t say banks should make TARP repayment a priority, he said the Treasury welcomes their efforts to raise funds they can use to leave the program.
“Repayments will not come at the expense of lending capacity, they will improve it,” Geithner said. “We ran a strategy from the beginning designed to recapitalize the banking system with private capital.”
After blasting Wall Street “fat-cat bankers” on Dec. 14, President Barack Obama said banks have an obligation to help the recovery. That’s not translating into more lending by the country’s biggest financial firms, according to Treasury surveys of the 22 largest companies that received capital from the TARP.
“I don’t see how exhortation works with bankers,” said James Galbraith, an economics professor at the University of Texas and former executive director of the Joint Economic Committee. “Lending to the private sector requires that the private sector want to borrow and have the collateral — not true at present.”
Meanwhile, Wells Fargo & Co. and Citigroup Inc. both launched plans this past week to exit the TARP and raise capital to repay the government.
Bank of America paid back its $45 billion in TARP funds and Wells Fargo is in the process of returning all $25 billion it received.
