US Treasury Secretary Tim Geithner has admitted America’s original bank bail-out was “inadequate”, as he set out a revamped plan to provide more than $2 trillion to stabilise ailing financial institutions and revive lending.
Mr Geithner, who as the former president of the Federal Reserve Bank of New York was instrumental in devising the previous $700bn bail-out, admitted that the “force of government support” in the Autumn failed to prevent the “deepening pressure brought on by the financial crisis.”
Admitting public distrust in the first bail-out, led by his predecessor as Treasury Secretary, Hank Paulson, Mr Geithner admitted that today's “comprehensive strategy will cost money, involve risk, and take time.”
Today's plan comes a day after President Barack Obama used his first White House press conference to tell Americans that passing his massive economic stimulus bill would mean the difference between "catastrophe" and saving or creating "up to four million jobs."
US stock markets markets responded badly to the plan, with the Dow Jones Industrial Average extending losses to more than 3pc in early trading.
In place of October's plan, which simply injected capital into major US banks and hoped for the best, Mr Geithner unveiled a three-prong programme which he hopes will “use taxpayers’ money in ways that will benefit them.”
The programme will be known as the “Financial Stability Plan” – ditching the TARP (Troubled Assets Relief Programme) moniker – and Mr Geithner said that it would be monitored closely and reviewed regularly to ensure it is working. Tim Geithner Unveils New Plan to Rescue US Banking System >>> By James Quinn, Wall Street Correspondent | Tuesday, February 10, 2009
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The Obama Administration laid out plans yesterday to marshal an extraordinary $3 trillion to stabilise America's stricken banking sector and revive its collapsing economy. US shares dropped sharply despite an unprecedented few hours of emergency government action.
First, President Obama's Treasury Secretary unveiled a sweeping new rescue plan for the US banking system that could amount to at least $2 trillion. It involves a combination of taxpayers' and private money to help to free up the country's frozen credit markets and to save the financial sector from collapse.
Timothy Geithner's appearance unsettled Wall Street mainly because business leaders were concerned about the lack of detail in his plan. Two hours later an entirely separate plan - Mr Obama's $838 billion economic stimulus package aimed at creating jobs and reviving the economy - was narrowly passed by the US Senate, but in the face of almost unanimous Republican opposition. Needing 60 votes to avoid blocking tactics, the Bill attracted 61, with only three moderate Republicans backing it.
When Mr Obama was told of the Bill's passage during a rally in Fort Myers, Florida, he said: “That's good news. It's a good start.” Yet Mr Obama set himself tough benchmarks - as he did at a prime-time news conference on Monday night, part of a campaign to sell the stimulus package to the US public - in essence conceding that his presidency would succeed or fail on his ability to turn the economy around. He pledged that his stimulus plan would create or save three to four million jobs within two years. “If people don't think I've led the country in the right direction, you'll have a new president.” Barack Obama Team Rolls Out $3 trillion Plan to Save Economy >>> Tim Reid in Washington | Wednesday, February 11, 2009
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