Geithner Says Most Banks Have Adequate Capital

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, April 21, 2009.

Treasury Secretary Timothy Geithner said April 21 that the “vast majority” of banks currently have more capital than they need to be considered well-capitalized by their regulators.

Geithner, appearing before the Congressional Oversight Panel, also said maintaining confidence in key financial institutions, particularly as they raise new capital and restructure, has to remain a central objective of financial policy.

Looking ahead, Geithner told members that substantial additional losses at financial institutions “are all but certain.” Uncertainty about the real value of distressed assets and the ability of borrowers to repay loans has contributed to a decline in the confidence required for the private sector to make equity investments in major financial institutions, Geithner said. “We cannot allow doubts about the viability of major institutions to undermine the financial system as a whole,” he warned.

The secretary said that in cases where bank stress tests reveal that institutions need exceptional levels of assistance, “we will make sure that assistance comes with conditions that provide for the necessary degree of accountability, [to] help ensure these firms emerge stronger rather than weaker.”

Meanwhile, in a letter to Elizabeth Warren, Chairman of the Congressional Oversight Panel, Geithner wrote that the Treasury estimates that there is at least $109.6 billion in Troubled Asset Relief Program (TARP) funds authorized under the Emergency Economic Stabilization Act (EESA) still available for use. The total figure is expected to rise to $134.6 billion when $25 billion is paid back under the Capital Purchase Program (CPP) over the next year.

Geithner stated that many private analysts expect more than $25 billion to be paid back under CPP over the next year. He noted that even under the Treasury’s conservative estimates of available funds, “we have the resources to move forward implementing all aspects of our Financial Stability Plan.”