Wall Street, Congress Unsure About TARP Plan
RENEE MONTAGNE, host:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
LINDA WERTHEIMER, host:
And I'm Linda Wertheimer.
It was another bad day in the financial world yesterday. We learned the U.S. government's new plan for the banking system will be hugely expensive, but it's more an outline than a polished proposal. In a moment we'll hear about efforts to get private investors involved in the bank rescue.
But first we look at Treasury Secretary Timothy Geithner's speech yesterday. It left out important details, like the overall price tag. Investor reaction was swift and sour. The Dow Jones Industrial Average fell more than 380 points.
NPR's Scott Horsley reports.
SCOTT HORSLEY: The stock market began dropping right around the time Secretary Geithner started talking about the new plan. And later in the day Geithner encountered similar skepticism when he went to brief the Senate Banking Committee on Capitol Hill.
After several hours of testimony, Tennessee Republican Bob Corker said he still didn't have a clear idea of how the government planned to prop up the banking system. Corker said the long-awaited stability plan had not lived up to its billing.
Senator BOB CORKER (Republican, Tennessee): I think the White House and you ought to communicate, and that the president said you would be very clear and there would be specific plans. Today we lost probably about a trillion dollars in the market as people look for those very clear and specific plans and instead heard guidelines and some platitudes.
HORSLEY: Lawmakers are still smarting from the last bank rescue plan, which cost taxpayers several hundred billion dollars but failed to thaw the frozen credit market. New Jersey Democrat Bob Menendez said he won't go down that road again.
Senator BOB MENENDEZ (Democrat, New Jersey): I'm looking for a plan that ultimately prioritizes Main Street at the end of the day. I'm looking for a plan that helps put cash in the pockets of people who are going to spend them and businesses that are going to create jobs. And I'm looking for a plan that ultimately ensures that we're going to save a lot more people in their homes.
HORSLEY: The general public is also suspicious of any new bank bailout. A Gallup poll last month found only one-in-five people willing to commit additional to the financial system without new assurances. In Elkhart, Indiana this week, Mmoja Ajabu told President Obama the government should stop trying to help banks and start helping homeowners struggling to pay their mortgage.
Mr. MMOJA AJABU (Elkhart, Indiana Resident): To try to give it to a bank and give a low interest rate, and the person whose home is being foreclosed on don't have a job, don't help anybody. It's a sale that nobody can take advantage of because you ain't got no money.
(Soundbite of applause)
HORSLEY: Confronting all this pushback, Geithner said the government is working on a plan to prevent foreclosures but won't have details for several more weeks. He also said he understands the public's mistrust, given the mistakes of bank bailouts in the past.
Secretary TIMOTHY GEITHNER (Department of Treasury): Our challenge is much greater today because the American people have lost faith in the leaders of some of our financial institutions and they are skeptical that their government has used taxpayers' money in ways that will benefit them. This has to change.
HORSLEY: Under the plan Geithner did unveil yesterday, the government would pump more taxpayer dollars into the banking system, expand a program to program to promote consumer lending and create the public/private investment fund to buy up troubled assets now weighing on banks' balance sheets.
He warned that the rescue effort will be costly, time consuming and risky. But he also warned a complete collapse of the financial system would be even worse.
Sec. GEITHNER: Unless we restore the flow of credit, the recession will be deeper and longer, causing even more damage to families and businesses across the country.
HORSLEY: Geithner said banks that receive taxpayer assistance under the new plan will have to tell the government how they plan to increase lending and provide regular updates. But he also said the government should not try to micromanage banks, even in the face of public outrage over lavish perks and bonuses.
Sec. GEITHNER: I am deeply offended by many of the judgments they've made. It makes our job together much, much harder. But there is an important offsetting obligation we have, not to create the prospect that the government is going to come in and make these decisions for institutions that are - we want to remain in private hands and we want private capital to come replace our investments as soon as possible.
HORSLEY: President Obama downplayed the stock market's chilly initial reaction to the new plan. He told ABC's Nightline that Wall Street had just been looking for an easy way out of the financial mess. And he added, there is no easy way.
Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
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