Geithner promises "dramatic" banking plan

22 January 2009

Treasury secretary-designate Tim Geithner has told his Senate confirmation hearing that President Barack Obama's team is working on a "comprehensive plan" that will take action on a "dramatic scale" in order to unfreeze lending and stabilize the banking system.

Mr Geither said "substantial direct support" would be needed in order to reduce risk premiums, control interest rates and kick-start the "basic mechanism" of the credit markets, the Financial Times reports.

Priority would be given to restoring small business and student loans, as well as financing for car purchases and commercial and residential property loans, the nominee added.

When questioned about the option of establishing a "bad bank" to take on toxic assets currently clogging up the banking system, Mr Geithner said such institutions had played a role in the resolution of "most financial crises" - but getting the model right can be "enormously complicated".

He did not elaborate further on the details of the Obama team's plan, arguing that a failure to follow up on "tentative signals" given now could result in a further loss of confidence.

Since 2003, Mr Geithner has been president and CEO of the Federal Reserve Bank of New York.

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