The Treasury Department’s point person on overseeing the $700 billion financial rescue defended the heavily criticized program and said that it has helped stabilize the financial system.
Assistant Treasury Secretary Neel Kashkari said that the program has helped to increase lending to businesses and consumers.
Kashkari has been at the center of the Treasury Department’s response to the unfolding financial crisis, particularly since October, when Treasury Secretary Henry Paulson named him to oversee the $700 billion rescue package.
Democrats and Republicans have lambasted the department for how it has implemented the plan, and particularly over how the department has shifted strategies on dealing with the turmoil in the financial markets.
The Treasury Department has already allocated the first half of the program to a range of financial institutions and other companies. Congress would need to grant its approval to the president for access to the remaining $350 billion. Lawmakers have sought to restrict how the rest of the money can be used, possibly for efforts to reduce mortgage foreclosures. Bush will most likely leave the rest of the funds to President-elect Obama to seek, which will set up contentious negotiations in Congress.
Originally proposed as a way to purchase troubled assets, the Troubled Asset Relief Program, or TARP, has been used to put $250 billion in capital into banks and also to prop up American International Group, General Motors and its financing arm, and Chrysler LLC.
Kashkari defended the shift, saying that the financial situation deteriorated rapidly in September and October, and Treasury decided that it needed to make quick capital injections instead of purchasing troubled assets. He also noted that after Treasury allocated the money for capital, officials decided they did not have enough resources for an asset purchase plan.
Kashkari says that should Obama’s administration choose to focus on purchasing capital, it should spend heavily.
“If they choose to do it, it should be done in a very, very large scale,” he said, adding that Treasury had drawn up plans for asset purchases as early as spring 2008. But the department ran into a range of problems as it tried to sell the plan.
“How do you go to the American people and Congress for authority to intervene before a crisis has happened?” Kashkari said. “Even though the crisis was right before us, getting that passed was not trivial,” he said, referring to the bruising votes in October on the financial rescue package.
Congressional Democrats have focused their criticism on Treasury failing so far to use some of the money for a plan to reduce mortgage foreclosures and support the housing market, which continues to show signs of stress.
Kashkari said the department has hired 90 people to run the rescue program, and almost all of them will stay with the department under the incoming administration.
“Almost all of the remaining positions are being filled by people who are planning to remain with the program after the transition,” said Kashkari.