"This is a challenge more complex than any our financial system has ever faced," Geithner said.
Geithner also made it clear that there is plenty of blame to go around. He attacked banks – and average Americans – for taking on risks they shouldn't have.
"Investors and banks took risks they did not understand. Individuals, businesses and governments borrowed beyond their means," Geithner said. "The rewards that went to financial executives departed from any realistic appreciation of risk. "
This Treasury plan is part of a broader offensive by the Obama administration to try and dig the nation out of recession. The Senates passed its version of Obama's $838 billion economic stimulus bill aimed at creating jobs. The plan must now be reconciled with an $819 billion version from the House.
Republicans have opposed both the House and Senate versions, saying they are too expensive. Republican senators held a news conference after the vote today to say they will continue to fight what they call "pork" in the measure during the House and Senate conference. "My guess is it gets even larger when it goes to conference," predicted Sen. John Thune, R-S.D.
The bill has been stalled as Democrats and Republicans fight over the role of government and whether the best way to tackle the problem is through additional spending or tax cuts. Obama has tried to gain public support for his plan through a prime-time press conference Monday, a campaign trip to Elkhart, Ind., and a today trip to the high foreclosure state of Florida.
The new spending by the Obama administration is in addition to the massive amounts of money that have already been poured into the struggling financial sector.
During the final months of the Bush administration, $250 billion was pledged to financial institutions, $40 billion to insurance giant AIG, an additional $20 billion to both Citigroup and Bank of America, and more than $17 billion to General Motors and Chrysler. Additional funds were used to guarantee various debts held by Citigroup and Bank of America and to support a new program by the Federal Reserve to purchase debt consisting of auto, student and credit card loans.
The government may eventually return to Congress to ask for more money for the banks, although that is considered unlikely in the immediate future.
"They need to be flexible in their approach and have a menu of options; one size doesn't fit all," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable. "[They should be] speeding the relief to where the economy needs it most. The most important thing they can do is help restore confidence in the system, and by doing quick and decisive action, they will achieve a large measure of that."
Barry L. Ritholtz, CEO of Fusion IQ, an institutional research firm, and the author of "Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World Economy," said he expects "more of the same."
"I thought this new administration was all about change we can believe in. Instead, it's really a carryover of some of the Bush-Paulson policies, which were all horrific and did not stop the crisis, did not repair the economy," Ritholtz said. "It was just flailing about and wasting money."
Ritholtz said it is time to stop throwing more cash at the banks and nationalize them.