“There are tentative signs that the financial system is beginning to stabilize, and that our efforts made an important contribution,” Herb Allison, assistant secretary for financial stability, said today in testimony before a congressional oversight panel. “Key indicators of credit market risk, while still elevated, have dropped substantially.”
Allison was confirmed by the Senate this month to head up the office, created by Treasury last year to oversee the Troubled Asset Relief Program. The office has 166 staff as of June 22, he told lawmakers, adding that while the Treasury has “accomplished a great deal in a short amount of time,” its work is “far from finished.”
The TARP has funded billions of dollars in government investments for faltering banks, helped rescue the U.S. auto industry, propped up insurer American International Group Inc. and provided money to help homeowners with mortgage refinancing.
Allison pointed to May increases in consumer confidence and housing construction as signs that the economy “is beginning to mend.” New-home sales that same month decreased 0.6 percent from April, the Commerce Department said today.
More than 30 firms have repaid $70 billion in TARP funds and the U.S. government has collected an estimated $5 billion in dividend payments from banks that it assisted, Allison said.
Stress Tests
Responding to questions from lawmakers, Allison said the Treasury supports “periodic” stress-testing of the nation’s biggest banks to ensure stability in the financial system. He also said the first phase of the department’s Public-Private Investment Program to rid bank balance sheets of toxic assets should be announced soon.
Allison told the panelists that the Treasury soon would publish its method for pricing warrants that the government received from banks under the TARP’s capital purchase program. He said he’s confident that the details for determining the value of warrants and the timing of any sales will be disclosed by early July.
“If the bank decides not to repurchase the warrants, then we have some choices to make about how we might dispose of those,” Allison said. “We have been studying this issue very carefully over time and will soon be publishing on our Web site our approach to valuing the warrants and if it comes to that, disposing of the warrants.”
Allison also said it’s “too early” for Treasury Secretary Timothy Geithner to decide whether to extend TARP spending authority past the end of this year. “We are very reluctant shareholders in corporations,” he said.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Last Updated: June 24, 2009 17:23 EDT