Treasury Secretary Tim Geithner came to Capitol Hill today to pitch lawmakers on President Obama's $3.8 trillion budget, but found himself defending the administration's economic rescue measures against criticism from restless lawmakers on both sides of the aisle.
"This budget is designed to help make sure that Washington is creating the conditions that allow the private sector to grow and expand, that allow businesses, small and large, to create jobs and make investments," Geithner told the Senate Finance Committee at a hearing this morning.
Obama today is rolling out the latest in a series of proposals aimed at helping small businesses. The new measure would transfer $30 billion in repaid funds from the $700 billion Troubled Asset Relief Program to create a new small business lending fund to be distributed through around 8,000 community banks.
"For the average American, for many businesses, this is still the worst economic environment and most challenging economic environment they have ever experienced," Geithner said. "And that is true even though we have been successful in putting out this financial fire at the center of the system."
But a number of Democrats expressed skepticism that the administration's new small business initiative would work.
"There's a sense that perhaps there's not sufficient sense of urgency in the administration about getting assistance for small businesses and also for community banks, to get that program working better," said the panel's chairman Max Baucus, D-Mont.
"I continue to be uncertain with respect to how this new program is going to improve on two others that your department inspector general has criticized," stated Sen. Ron Wyden, D-Ore.
In a report released last weekend, Neil Barofsky, the special inspector general for TARP, noted that the Treasury Department announced a small business aid program last March but details have "not been announced and no funds had been disbursed."
Sen. Maria Cantwell, D-Wash., criticized the administration for electing to go through Congress with the proposal rather than implement it on their own.
"Where is the urgency in solving this?" Cantwell said. "My point is why wait? Why not come to terms right now with community banks? Because the big banks, somebody came to terms with them and they walked away very happy customers, but small businesses in America are not getting access to capital."
"Nothing would make me happier if small banks want to come today to the programs we have in place today and take capital from them," Geithner replied. "But they have in some ways voted with their feet – hundreds and hundreds took back their applications because of a set of concerns, concerns about terms."
"You should take swift, deft action to implement that immediately," Cantwell told Geithner. "If you don't get it and understand, that's what people in America are angry about. They're angry that that's what happened. The past administration took swift, deft action to help the big banks on terms that some people find outrageous today and now these small banks aren't getting access to the terms that would help small business."
"These aren't unfair terms. These aren't unfair justifications," she said. "But people put the screws to the community banks and gave all the money away to the big banks and if we don't implement change right now, we are going to lose more jobs."
The administration, as Geithner noted, has included in the new budget a proposal to recoup $90 billion in expected TARP losses with a fee on about 50 of the nation's biggest banks. The Treasury chief today said that the fee "can and will be extended" until every penny dished out in TARP has been returned.
But Republicans such as Sen. Jon Kyl, R-Ariz., worried that the nation's ballooning debt could weaken the dollar if foreign creditors reduce their holdings of Treasuries.
"Issuing more government debt makes the dollar weaker and that's a real problem," Kyl said. "We need to do everything we can to work around that problem and it's probably not the best idea in the world to be taking on more debt if we want to have a strong dollar."
"When the world was in crisis, when people were deeply concerned about the stability of our financial system and the stability of the global economy, people still wanted to hold dollars and hold US financial assets," Geithner said. "The dollar rose over that period of time…and that's because they believed in us."
"If we do not make people believe that we are going to fix those deficits, bring them down over time," he added, "then we will risk losing confidence in our financial future and that will raise interest rates, you'll have less investment, and that'll be bad for the American economy."
At today's hearing Geithner found other lawmakers who voiced their support for the administration's plans.
"Those are pretty good ideas and not just Democratic ideas and not just Republican ideas," said Sen. Tom Carper, D-Del., urging his colleagues to get behind Geithner's efforts. "Those are pretty smart ideas and I would hope that we can find common ground."