Geithner Denies He Wants Bailout Authority
Treasury Secretary Tim Geithner, who’s testifying this morning before the House Financial Services Committee on legislation empowering the White House to take over Wall Street firms when their failure threatens the finance system on the whole, just made a curious claim. Asked by Rep. Maxine Waters (D-Calif.) whether the legislation grants the White House the power to spend taxpayer dollars, Geithner had a terse, one-word response: “No.”
The Treasury Secretary went on to say that the what’s being requested is merely “the authority to wind them [failed companies] down.”
What he didn’t mention is that the winding down will require taxpayer dollars, at least in the early phases of a takeover.Those losses are designed to be recovered within 60 months by tapping shareholders and creditors, and if necessary by imposing an after-the-fact tax on other large and solvent institutions. Yet the provision also allows the government to extend that 60-month recovery window indefinitely.
“It could be 60 years,” said Rep. Brad Sherman (D-Calif.), in response to Geithner.
“Further,” Sherman said in a statement yesterday, “it is difficult to see how any tax on financial institutions would provide hundreds of Billions of revenue, which might be needed to repay a large bailout.”