Geithner defends stimulus, calls for derivatives regulation

WASHINGTON -- Despite persistently high unemployment, Treasury Secretary Timothy Geithner said Friday the Obama administration's plan to stimulate the U.S. economy by spending billions of dollars on construction and other local projects is on the "expected path."

"There's been substantial improvements in arresting what was the worst recession globally we've seen in generations," Geithner told lawmakers Friday.

Geithner's remarks came as public opinion polls show waning support for President Obama's economic policies. Republican critics say the rising unemployment rate is proof that the $787 stimulus has not helped reverse the effects of the recession.

About 2 million jobs have been lost since Congress passed Obama's stimulus package in February. Unemployment now stands at 9.5%, the highest in 26 years. Some Obama allies have been calling for Congress to pass a second stimulus package.

"I was just wondering, where do you think your plan went wrong?" asked Rep. Bill Posey, a Republican.

Geithner said the rate of decline in the economy has slowed, consumer confidence has improved, the financial system is healing, and concern about a financial meltdown has receded.

"Those are critically important signs of initial progress," Geithner said.

Geithner said unemployment is an inescapable element of a recession. The stimulus plan, he said, "was necessary and critically important to reduce the risk that we'd see hundreds of thousands losses of jobs and we'd see million of job losses beyond this point and see thousands of more business fail unnecessarily."

Geithner's defense, before a joint hearing of the House Financial Services and the Agriculture committees, came as he called for greater government control over the generally unregulated but complex derivatives market, which he said contributed to the financial crisis.

"Establishing a comprehensive framework of oversight is crucial," Geithner said in his opening remarks to a joint hearing by the House agriculture and financial services committees.