Geithner: Financial System Beginning to AdjustThe nation's financial services system U.S. financial system is beginning to adjust, and lending is beginning to improve. But more restructuring is still ahead for the industry, says Treasury Secretary Timothy Geithner in a speech before the Independent Community Bankers of America (ICBA).
Geithner also says there are plans to reopen the bailout fund to smaller banks once the larger ones repay some of the money they received. "We have already seen a substantial amount of adjustment in our financial system. The more vulnerable parts of the non-bank financial system no longer exist," Geithner says.
There is still more restructuring ahead for the financial industry as a whole, "but a substantial part of the adjustment process is now behind us," Geithner told the ICBA members. His broad goals for regulatory reform were also discussed along with the need for authority to unwind failing financial institutions that are large enough to damage the entire financial system. Geithner proposes that large, systemically important firms pay into a fund that would cover the costs should one of them need to be shut down. He sees it needs to be a separate solution where the burden of funding is paid by the large institutions in a level proportionate to their size.
The Obama administration proposals for regulatory reform will focus on better rules and more consolidated oversight so that banks have less opportunity to shop around for the most lenient regulator, Geithner says. "Our system now is too complex ... It is not a system we can afford to live with any more."
Community banks with assets under $500 million will be able to apply for funding under the Troubled Asset Relief Program (TARP), and the window to apply will be open for six months. Those now participating can also reapply with an expedited approval process.