Stimulus On "Expected Path," Geithner Says

Treasury Secretary Tells Lawmakers Administration Making Progress in Economic Recovery

(AP)  Updated 1 p.m. EDT

Despite persistently high unemployment, Treasury Secretary Timothy Geithner said Friday the Obama administration plan to stimulate the U.S. economy by spending billions of dollars on construction and other local projects is on the "expected path."

"There's been substantial improvements in arresting what was the worst recession globally we've seen in generations," Geithner told lawmakers Friday.

Geithner's remarks came as public opinion polls show waning support for President Barack Obama's economic policies. Republican critics say the rising unemployment rate is proof that the $787 stimulus has not helped reverse the effects of the recession.

About 2 million jobs have been lost since Congress passed Obama's stimulus package in February. Unemployment now stands at 9.5 percent, the highest in 26 years. Some Obama allies have been calling for Congress to pass a second stimulus package.

"I was just wondering, where do you think your plan went wrong?" asked Rep. Bill Posey, a Republican.

Geithner said the rate of decline in the economy has slowed, consumer confidence has improved, the financial system is healing , and concern about a financial meltdown has receded.

"Those are critically important signs of initial progress," Geithner said.

Geithner said unemployment is an inescapable element of a recession. The stimulus plan, he said, "was necessary and critically important to reduce the risk that we'd see hundreds of thousands losses of jobs and we'd see million of job losses beyond this point and see thousands of more business fail unnecessarily."

Geithner's defense, before a joint hearing of the House Financial Services and the Agriculture committees, came in the midst of his call for greater government control over the generally unregulated but complex derivatives market, that he said contributed to the financial crisis.

"Establishing a comprehensive framework of oversight is crucial," Geithner said in his opening remarks to a joint hearing by the House agriculture and financial services committees.

Despite apprehension among Republicans, the effort to add government restrictions to these more freewheeling financial instruments has gained support within the Democratic-controlled Congress.

"Clearly, we're going to be significantly expanding regulation of derivatives," said Rep. Barney Frank, the chairman of the Financial Services Committee.

Derivatives are financial instruments whose values are based on something else, such as a mortgage-backed security or a commodity like oil. The allure of the over-the-counter derivative, as opposed to those swapped on exchanges, is that it can be individually negotiated and tailored to meet the specific needs of the buyer.

Geithner said the ease with which derivatives were bought and sold in an era of easy credit encouraged financial institutions and investors to take on too much risk. At the same time, government regulators weren't given the proper tools to mitigate those risks and protect the American consumer, he said.

"The complexity of the instruments overwhelmed the checks and balances of risk management and supervision," he said.

The administration's proposal, part of a broader overhaul package, has run up against much of the financial industry, which says it would raise costs and squash innovation.

Some lawmakers and federal regulators say they are skeptical, too.

"My fear is that the administration is going down the path of shifting risk not to the investors and the dealers, but ultimately to the taxpayers," said Rep. Spencer Bachus, the top Republican on the Financial Services committee.

[sjc_1]

We will see improving jobs numbers in the 4th quarter of this year and positive GDP in the 1st quarter of next year. Considering the magnitude of the downturn, those will be amazing results.

[walt1944]

Geitner says that the "recovery" is on the "expected path".

Look at what's happening:
1) Mega-banks are making money again while the "small" banks are being "REPOED" by the FDIC!
2) AIG hasn't asked for more bailout money since the spring!!!
3) GM is out of bankruptcy and claims it will make enough money to pay back the government by the end of the year!! It WON'T reduce prices on its products, however!!!!!!!
4) Wal-Mart "says" it will create 2 million jobs by the end of the year (at below minimum wage with NO BENEFITS!)!

So, the news is rosy----FOR CORPORATE AMERICA!!!!!

As far as the 10% OFFICIALLY out of work (20% REALLY!) they just have to wait until their jobs come back from STILL-RED CHINA!!!!!!!!

So, Timmy, run and tell Obama the "good news"; he believes you rather than someone standing in the unemployment line!!!!

HAIL OBAMA??????????
4)

[whitemale08]

Hey Tim, you can't 'stimulate' the economy by forcing the consumer to 'borrow-and-spen' again.

You just did that with the housing/derivatives bubble and it bursted!

Now you have to swallow your pride and put Goldman Sucks in RECIEVERSHIP AND BANKRUPTCY RE-ORGANIZATION to free up our tax money to re-invest in the rebuild of America with physical hard infrastructure, mag-lev transportation, water systems and nuclear power plants.

And once we finish that then we can help the rest of the developing world to do the same for all humanity.

That's the legacy we want to pass on to the next generation, not how many shopping bags we got from Macy's.

Come on Tim, GET WITH THE PROGRAM!

[speakinup22]

Stimulus On "Expected Path," Geithner Says

Hoo-Hoo !

You mean THIS is what you call recovery, Geithner ?



Uh, is there any question as to why we didn't want Geithner in this position NOW ?

I'd sure like to know what the REST of his plan for this year would look like. And, if he can't spell that out - then he is flat out being disingenuous about his current comments. To be able to say it is on the expected path means you have a plan to compare it to.

What ? Did he just run out of path ?

[whitemale08]

HELL, Tim,

You might as well say: "The fundamentals of our economy are strong".

YOU'RE WORSE THEN PAULSON

DAMN DUDE...YOU'RE THE WORSE!!!!!

[mjvwsr]

Stimulus On "Expected Path," Geithner Says

that would be the path to destruction

[GiveMeFreedom]

Hey Timmy, more like stupid politicians, careless bureaucrats and a few crooked and greedy slime balls like Madoff are most of the problem. You also failed to mention the UAW and other unions that did not realize the perilous situation their companies were in or simply did not give a (you know what).

[payasyougo]

"Geithner: Risky Derivatives Doomed Economy"
----
Actually, reckless activities in real estate in four states created a powder keg.

It was Geithner and any rescue plans that doomed the economy.

If you don't hold people accountable for their actions they won't change their behavior. And worse, it was funded with future tax revenues.

[eightsigma]

"reckless activities in real estate"
What do you think a credit default swap is? It's a form of derivative. The garbage loans would never have been written if the banks weren't buying "mortage salads with toxic croutons", which the ratings agencies said were just fine. The problem was a failure of regulation.

[Livinontheedge]

So Bush allowed the Killer derivatives due to not regulating the banking system and telling them to loan to unqualified people and giving those unqualified down payments..

[xlib]

No, that came out of the Community Reinvestment Acts of the 1970's & 1980's. Do some research there fella and look up the congressional hearings on fannie & freddie held in 2004.
BTW-your thug administration has just given the go ahead for fannie & freddie to continue the subprime loan debacle. See, you really need to look further than the daily puff pieces on them messiah your media runs.
The subprime mortgage mess was a long time in the makinq.

[stn_sage]

First, the Federal Reserve is irresponsible now---and Mr. Obama wants to give them MORE responsibility allowing THEM to keep large, influential banks in-line? He's joking, right?!

This is like 'putting the fox in charge of the henhouse!' The Fed isn't going to regulate these other banks! The suggestion that they would is ridiculous!

Second, if Mr. Obama wants to improve the situation, he also needs to get a new Secretary of the Treasury, Mr. Paulsen's protege was a poor choice to begin with! Get someone who wants to improve the situation!!

Finally, it is stated in the article that Mr. Geithner said 'many investors used the instruments to evade regulation, exploit regulatory loopholes or minimize taxes.' WRONG!

Maybe many investment firm traders did, but few investors did, and even IF they did, whose fault is that?! WHO advised them to do so?!

This is why I think Mr. Geithner should be replaced, because he practices 'doublespeak', the way the town drunk puts down liquor! And, therefore
he is not dependable and cannot be trusted!