US Treasury defends financial rescue before skeptical lawmakers
The US Treasury on Wednesday said efforts to stabilize the financial system were making good progress but legislators complained that billions of dollars were being spent with little oversight and few results for the wider struggling economy, dpa reported.
In a hearing on Capitol Hill, lawmakers criticized the government for plugging nearly half of a 700-billion-dollar financial rescue package into cash-strapped banks over the past two months while consumers still struggled to gain access to loans, the backbone of the US economy.
The government funds "have been greatly mismanaged to date, and they have not been used to help consumers purchase the goods that they need," said New Jersey Congressman Bill Pascrell.
Neel Kashkari, the Treasury official who manages the financial bail-out passed by Congress in October, urged patience as the money works its way through the system and confidence starts to return.
"The system is fundamentally more stable than it was when Congress passed the legislation," Kashkari said in testimony before the House Financial Services Committee.
The financial crisis has plunged the United States into recession. Kashkari cited a drop in the cost of inter-bank loans over the past few weeks, but acknowledged many banks had yet to ease restrictions on lending to the public.
"As long as confidence remains low, banks will remain cautious about extending credit and consumers and businesses will remain cautious about taking on new loans," he said.
The bankruptcy of Lehman Brothers Holdings Inc in September sparked the near-total collapse of the US financial industry, prompting cash-strapped banks to hold onto their limited reserves and stop lending.