Geithner: Banks still in distress

WASHINGTON (AP) — America’s banks are still broken despite all their bailout billions, Treasury Secretary Timothy Geithner told impatient rescue overseers Tuesday as they pressed him on when things will get better and how much it will cost.

A bleak new report estimated U.S. banks and other financial institutions could lose a stunning $2.7 trillion in all.

How well is the mostly spent $700 billion federal bailout working? “To date, frankly, the evidence is mixed,” Geithner told a congressionally appointed oversight panel.

Confidence in the program is wearing thin on Capitol Hill.

With lawmakers back from their spring break, even bailout supporters are skeptical that Congress — weary of bankers’ bonuses and still-scarce credit — would approve additional bank-rescue money if requested.

Geithner’s testimony signaled that the administration was not preparing to ask.

Wall Street was cheered by Geithner’s assessment that “the vast majority” of banks could be considered well-capitalized. Bank stocks had slid Monday but bounced back Tuesday.

Still, the government’s effort to stabilize the financial sector and unclog credit markets has come under heavy scrutiny.

Officials must do a better job in carrying out and explaining its efforts to shore up the financial system, the head of the oversight panel told Geithner.

“The sense of fear and uncertainty has not gone away, but it’s been joined by a new sense of anger and frustration,” said Elizabeth Warren, who is also a Harvard University law professor.

“People are angry that, even if they have consistently paid their bills on time and never missed a payment, their TARP-assisted banks are unilaterally raising their interest rates or slashing their credit lines.”

Of the $700 billion authorized by Congress for the Troubled Asset Relief Program last October, Geithner said about $110 billion is left.

With about $25 billion expected to be repaid this year, the total available is about $135 billion.

Some banks are maneuvering to pay back some of the bailout money, unhappy with the strings attached. But Geithner said that doesn’t mean the government would necessarily accept the repayments.

These questions have to be first answered, he said: “Do the institutions themselves have enough capital to be able to lend and does the system as a whole, is it working for the American people for recovery?”

A series of “stress tests” are being administered to banks by the administration to help judge their financial health.

The treasury secretary said that although most banks have more than enough capital to satisfy federal regulators, a combination of factors — including worries about the broader economy and the crushing weight on their balance sheets of bad loans and other toxic securities — was feeding “uncertainty about the health of individual banks.”

That, in turn, “has sharply reduced lending across the financial system” and was holding back economic recovery, Geithner said.