Washington, DC – Today, the United States Senate Committee on Banking, Housing and Urban Affairs held a hearing to receive testimony from Timothy Geithner, Secretary of the Treasury, on the Obama Administration’s strategy – announced today – for the implementation of the Troubled Assets Relief Program (TARP). The hearing, entitled “Oversight of the Financial Rescue Program: A New Plan for the TARP,” was the first Congressional testimony of the new Treasury Secretary.
In the hearing, United States Senator Michael Bennet urged Secretary Geithner to use his authority under the TARP program to promote the marketability and sustainability of state, county and municipal bonds markets, which have been adversely affected by a lack of liquidity support from financial institutions.
“We have seen that the current credit crisis has not only affected American business and consumers, but our state, county and local governments as well,” said Senator Bennet. “And while there are signs of improvement in the market place, important components of the credit markets for states and local governments remain frozen. The markets for short term and variable rate bonds have been particularly hard hit.
“Market professionals tell us that the problem is one of liquidity in the market place. The credit of states and local governments is generally strong, but the market place fears a lack of liquidity in state and local bonds. We have learned that financial institutions, including those receiving TARP money, have stopped providing liquidity support for state and local bonds.
“And while we have seen Treasury and the Fed provide liquidity, guaranteed loans, support for commercial paper and other assistance to consumers and business, help is hard to come by for our state, county and municipal governments who are struggling in the midst of this economic crisis.
“I believe, as many of my colleagues on this Committee believe, that it is within the authority of the Fed and the Treasury to expand targeted relief for those sectors of the municipal bond market that need it most – short term variable rate and lower rated securities.”
In his testimony, Secretary Geithner pledged to work with Senator Bennet and other members of Congress to examine possible avenues by which the Treasury, via TARP, can promote the marketability and sustainability of state, county and municipal bonds markets.
“I am pleased by Secretary Geithner’s willingness to work with Congress and this Committee to get credit flowing back to our state, county and local governments,” said Senator Bennet. “The bonds issued by these government entities are used to fund some of the most “shovel ready” state, county and local projects across the country, which will mean more jobs and more opportunities for economic growth.”
Last week, Senator Bennet joined nine other members of the Senate Banking Committee in a letter to Secretary Geithner urging the Treasury to use its authority under TARP to ease the flow of credit to state, county and municipal governments. The Senators’ letter to Secretary Geithner is attached.