Image: Tim Geithner
Susan Walsh  /  AP
Lawmakers chided Treasury Secretary Tim Geithner over the bailout plan’s lack of specifics.
msnbc.com staff and news service reports
updated 2/11/2009 4:25:22 PM ET 2009-02-11T21:25:22

A day after financial markets gave his bank bailout plan a resounding Bronx cheer, lawmakers pressed Treasury Secretary Timothy Geithner about whether the Obama administration would need more money to fund its financial industry rescue plan.

Geithner appeared before the Senate Budget Committee Wednesday to discuss the plan he unveiled Tuesday to create a private-public partnership that would buy up banks' bad mortgage-related assets that have clogged up the world's credit markets.

The ambitious plan was short on the kind of details that Wall Street was expecting. Stocks tumbled Tuesday, with the major indexes shedding more than 4 percent and the Dow dropping 382 points.

The White House said Wednesday the administration's bailout plan that sent Wall Street tumbling was not designed for a "one-day market reaction."

President Barack Obama's chief spokesman Robert Gibbs downplayed Tuesday's drop in share prices. Gibbs said previous economic plans sent the markets upward but ended up being failures. He said the administration is looking at a broader fix, not a one-day boost for Wall Street.

Geithner declined to speculate on the likelihood the administration will ask for more funds beyond the roughly $350 billion remaining in the original $700 bailout program, but he told the Senate Budget Committee that further requests are possible.

That did not satisfy Sen. Lindsey Graham, a South Carolina Republican.

"So you have no clue," Graham said. "Why not just ask for more? We know you will."

Committee Chairman Sen. Kent Conrad defended the administration but agreed the financial bailout likely will cost more than the original $700 billion.

"People have got to take a deep breath here," he told reporters after the hearing. "This administration has been in office for two weeks."

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Conrad estimated that it will take $300 billion to $500 billion more in taxpayer funds to fully bail out the financial system, an amount that he said members of Congress could grant.

"These are unhappy circumstances," Conrad said. "But most people around here know we've got to respond in a way that's effective."

The administration's plan includes a public-private fund of up to $1 trillion that would seek to purchase bad assets weighing down banks' balance sheets.

But Sen. Lamar Alexander cited economists' estimates that banks have $2 trillion in bad assets. "Aren't you really underestimating the size of this?" he asked.

Geithner said the administration would provide more information, including on costs, "as quickly as we can." He estimated that about $387 billion of the $700 billion rescue fund, formerly known at the Troubled Asset Relief Program, has been spent.

"Many of us were looking forward to a plan that could be presented in a straightforward, clear and detailed way," said Sen. Jeff Sessions. "Unfortunately, that is not what we received yesterday."

Geithner defended the lack of detail included in the plan, which was widely criticized Tuesday on Wall Street and Capitol Hill. The plan seeks to pump up to $2 trillion into the financial system to boost ailing banks and spur more lending.

He said the plan was presented in broad strokes to avoid repeating the "mistakes of the past 12 months where things were rushed out before they were ready, and strategy had to be adapted because of that."

Other senators urged Geithner to demand more accountability from banks and their executives in exchange for government money.

Even as Geithner was being questioned by senators, lawmakers were grilling the potential recipients of the proposed aid — the nation's top bankers — on how they have spent $160 billion of taxpayer money given to them up to now under TARP.

The top members of a key House panel told banking leaders Wednesday they must win over a disgusted public and work with Congress without hesitation to right the deeply troubled financial system.

"I urge you going forward to be ungrudgingly cooperative," said Rep. Barney Frank, the Democratic chairman of the House Financial Services Committee. "There has to be a sense of the American people that you understand their anger ... and that you're willing to make some sacrifices to get this working."

The panel's top Republican, Spencer Bachus of Alabama, said the bankers and Congress will have to do their part to sway people by "winning back their trust and their confidence."

Taxpayers are furious with big banks that benefited from the federal bailout designed to get credit moving again but that also spent lavishly on company retreats and office redecorating, and lawmakers are feeling the heat for signing off on the $700 billion plan.

In prepared testimony, the CEOs applauded the TARP program for making more loans available and promised to pay their share of the money back to the Treasury over time. Anticipating confrontations over their own compensation, several asserted that none of the government's money went to bonuses or dividends.

At least one banker sounded almost contrite.

"Many people believe — and, in many cases, justifiably so — that Wall Street lost sight of its larger public obligations and allowed certain trends and practices to undermine the financial system's stability," said Lloyd C. Blankfein, chairman and CEO of The Goldman Sachs Group Inc.

Meanwhile, key lawmakers announced agreement Wednesday on a $789 billion economic stimulus measure designed to create millions of jobs in a nation reeling from recession. President Barack Obama could sign the bill within days.

The middle ground we've reached creates more jobs than the original Senate bill and costs less than the original House bill," said Senate Majority Leader Harry Reid, one of the participants in an exhausting and frenzied round of bargaining.

The bill includes help for victims of the recession in the form of unemployment benefits, food stamps, health coverage and more, as well as billions for states that face the prospect of making deep cuts in their own programs.

It also preserves Obama's signature tax cut — a break for millions of lower and middle income taxpayers, including those who don't earn enough to pay income taxes.

Elsewhere on Capitol Hill, Neil Barofsky, special inspector general for the $700 billion TARP, told the Senate Judiciary Committee that several criminal investigations related to the program were already under way.

“We have already opened several criminal investigations involving multiple jurisdictions, and ... are closely coordinating our executive-compensation oversight efforts with the New York State Attorney General,” he said.

Trillions of dollars in government money will be potentially at risk of fraudulent activity in the multiple rescue programs to address the financial crisis, he said.

“These huge investments of taxpayers money, made over a relatively short time period, will require close oversight and will invariably provide an inventive to those seeking to profit criminally,” Barofsky said.

The FBI’s caseload of 38 corporate and financial institution investigations linked to the crisis represents an increase from about two dozen publicly reported last year.

The Associated Press contributed to this report.

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