Big Bank Bailout Money Goes To Small Banks

The Obama administration will use bailout money repaid by large banks to provide additional capital infusions to smaller banks, Treasury Secretary Timothy Geithner said Wednesday.

Banks with less than $500 million in assets will have six months to apply for the funds, Geithner said in remarks to the annual meeting of the Independent Community Bankers of America. They also will be able to apply for larger amounts than banks were allowed to request during the current round of investments.

The administration first indicated that the repaid funds would be used for further injections earlier this month when regulators announced the results of the "stress tests" conducted on the nation's 19 largest banks. Those tests found that 10 of the banks, including Bank of America Corp. and Citigroup Inc., needed to raise additional capital to survive a worsening recession.

Geithner also said the administration will propose an overhaul of the financial regulatory system in the "next couple" of weeks. The reforms will simplify and streamline the existing oversight structure, which he said is "too complex."

Due largely to the government's efforts, "the financial system is starting to heal" and "a substantial part of the adjustment process is now behind us," he said.

Still, the administration wants to move on an overhaul of the nation's financial rule book "while memory of the crisis is still acute," Geithner said.