Treasury Secretary Timothy Geithner appeared before a Senate committee Thursday to talk up the Obama administration's proposed reforms for regulation of the financial industry. But several Republican senators dwelt instead on the Troubled Asset Relief Program, centerpiece of the government's efforts to end the current meltdown.
Some good ol' bailout bashing took place, in other words, distracting from the proposed reform.
Sen. Jim Bunning (R-Ken.) asked Geithner whether he planned to use his power to extend the TARP for another 10 months at the end of the year, calling the granting of said power "A terrible mistake we made."
Geithner said he hadn't made up his mind.
"Then you think Treasury should have a slush fund of $700 billion under their control, which is what TARP is, because if you don't go above $700 billion you can use all the money for other purposes," said Bunning.
"We want to be careful and prudent in not prematurely declaring victory," Geithner said.
Sen. Bob Corker (R-Tenn.) picked up the ball from there, connecting the TARP slush fund concept to the proposed new resolution authority that Geithner said would allow "the government to resolve failing institutions in ways that impose the costs on owners, creditors and counterparties, making them more vigilant and prudent."
"It seems to me that what you're doing is in essence making TARP exist in perpetuity," Corker said. "The ad hoc nature of what has occurred, I think, is what has created much of the instability, and yet you resume under yourself under this resolution of power the ability to do exactly what is taking place under TARP."
"That's not true," Geithner said. "We wouldn't do that. TARP is temporary. It will fortunately go out of existence when the statute expires." He added that the new resolution authority would simply apply the principles of how the Federal Deposit Insurance Corporation's handles weak or failing banks and apply it to large bank holding companies.
Sen. Kay Bailey Hutchison (R-Tex.) picked up on the ad hoc theme.
"Every one of us who was here last fall feels that we were misled by the original intention of the Troubled Asset Relief Program, which was to take the money to buy troubled assets in banks to stabilize the banking industry," said Hutchison. "Last year that was proliferating into other areas and that has continued in your administration as well."
Hutchison asked if the TARP needs more congressional oversight. Geithner said that it does not.