Congress and the Administration Push Banks to Lend TARP Funds
This has been "light a fire week" in Washington. The CEOs of eight major U.S. banks were called before the House Finance Committee today to promise that they will use the money they get from the government's Troubled Asset Relief Program to extend credit and hopefully get the economy moving. The New York Times is live-blogging from the hearing, which committee chairman Barney Frank, a Massachusetts Democrat, opened by telling the bankers: "I urge you going forward to be ungrudgingly cooperative." There has to be a sense among the American people, he said, "that you understand their anger … and that you're willing to make some sacrifices to get this working."
Treasury secretary Timothy Geithner's announcement yesterday of revisions to the TARP program did not offer enough details to satisfy Wall Street, which greeted the changes with a decline of nearly 5% in the Dow Jones Industrial Average. The index gained nearly 1% in morning trading today. The plan provides for tougher oversight that aims to force banks to get their balance sheets in order.
Wharton faculty have urged the government to get tougher with banks over their use of TARP funds. In a Knowledge at Wharton podcast, finance professor Jeremy J. Siegel said the banks were "sitting on" TARP funds. That podcast and a complete archive of Knowledge at Wharton's coverage of the financial crisis can be found in the special report, "Wall Street's Day of Reckoning: What's Next?"
