Geithner: Bailouts cost less than 1 percent of US gross domestic product
US Treasury Secretary Timothy Geithner told top lawmakers Friday that much-criticized bailout programs in response to the 2008 economic meltdown will cost no more than 87 billion dollars.
Geithner’s letter came as the US Senate braced for a critical procedural vote Monday on legislation to enact President Barack Obama’s plan to rein in Wall Street and prevent another worldwide collapse.
“A year ago, we estimated that our support of the financial system could cost more than 500 billion dollars or 3.5 percent of GDP. We now expect that the direct cost of all our interventions will cost less than one percent of GDP,” he wrote.
The 700-billion-dollar Troubled Asset Relief Program (TARP), the US government effort to rescue the financial system, cleared Congress at the height of the financial crisis in October 2008 amid dire warnings of economic collapse.
Geithner also addressed other responses to the crisis sparked by the collapse of the US housing market in 2007, including the rescues of troubled insurer AIG and battered US automakers Chrysler and General Motors.
“Although conditions have improved, the financial recovery is incomplete and significant risks remain. We are working with the Congress to broaden the scope of the financial recovery for all Americans,” he said.
The letter came as President Barack Obama’s Republican foes accused the White House of backing Senate legislation that would not prevent massive future bailouts of “too big to fail” financial institutions in the future.
Democrats and Republicans have sought to harness still-smoldering anger at Wall Street ahead of November mid-term elections.