No sign that bailout will expire at year's end
Anne FlahertyThe nation's economic recovery has just begun and "we still have work to do," a senior Treasury official told Congress on Thursday, the strongest signal yet that the administration is prepared to extend its $700 billion bank bailout fund.
Herbert Allison, the department's assistant secretary for financial stability, cited declining prices in commercial real estate that could continue to weigh down bank balance sheets as evidence there is a long way to go before a true recovery takes hold.
"In this context, it is prudent to maintain capacity to address new developments," Allison told the Senate Banking Committee. "By bolstering confidence, having such capacity may actually reduce the need to use it."
The rescue plan, known as the Troubled Asset Relief Program, is credited in part with pulling back the financial sector from near collapse last year. But its infusions of money into huge banks, the giant insurer AIG and the auto industry have been unpopular with the public and in Congress.
The Treasury Department has the option of extending the program to October 2010 so long as it provides a justification to Congress.
Sen. Richard Shelby, the top Republican on the panel, said the government should end the program, whereas Democrats are expected to support the administration.
Sen. Christopher Dodd, who chairs the Banking Committee, said he shares voter frustration with a Wall Street bailout at a time when people are struggling to hang on to their homes. However, he said, he didn't regret helping to orchestrate the rescue fund because it helped bring the economy back from the brink of collapse.
"With the time we were given, and the circumstances we were confronted with, I think we did the right thing, and I think history will prove that to be the case," Dodd said.