One of President Barack Obama’s top economic strategists said on Thursday that the government was now starting to shrink many parts of the gigantic financial bailout that followed the collapse of Lehman Brothers last September.
“We must begin winding down some of the extraordinary support we put in place for the financial system,” said the Treasury secretary, Timothy F. Geithner, in written testimony prepared for the Congressional Oversight Panel on the Treasury’s $700 billion rescue program.
Citing evidence of increased strength through much of the financial system, and signs that the recession is ending, Geithner said the government was already scaling back many of the government’s special loan and guarantee programs.
Treasury officials, in a separate briefing with reporters, said they expected banks and other financial institutions to repay an additional $50 billion to the government, on top of $70 billion that has already been repaid, over the next 12 to 18 months.
“The consensus among private forecasters is that our economy is now growing; the financial system is showing signs of repair; and the cost of credit has fallen dramatically,” Geithner said. “It is clear we have stepped back from the brink.”
The Treasury’s $700 billion Troubled Asset Relief Program, or TARP, is the most visible piece of a much broader array of emergency measures that the Obama administration and the Federal Reserve have used to prop up the economy after it fell into the deepest downturn since the Great Depression.
The Treasury has invested $239 billion in banks since the program was created one year ago. It has also invested about $80 billion in rescue efforts for General Motors, Chrysler and automobile suppliers and more than $80 billion in Fannie Mae and Freddie Mac, the mortgage-finance giants.