Treasury official urges patience on rescue fund

The Treasury official overseeing the $700 billion rescue fund Monday urged patience as his department begins allocating the money to stabilize financial markets -- even as Congress has ramped up criticism over the program's implementation.

Interim Assistant Treasury Secretary for Financial Stability Neel Kashkari said in a speech that although much progress has been made, capital markets remain "fragile and confidence is still shaky." Kashkari made his remarks the same day Treasury announced that it would purchase $40 billion in preferred stock from American International Group Inc., making the insurer the first nonbank to receive funding under the program.

"This action was necessary to maintain the stability of our financial system," Kashkari said of the AIG investment, which will total $150 billion in federal funding to the insurer.

Kashkari's remarks come as House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., urged Treasury Secretary Henry Paulson Saturday to use the rescue program to help the domestic auto industry as General Motors Corp. teeters toward a bankruptcy filing. Senate Banking Chairman Christopher Dodd, D-Conn., said he believes the rescue fund could be available to the Big Three given the role that the industry plays in the economy and their respective financing units.

"We did extend the authority [in the law], but whether they want to provide that is another matter," Dodd said of Treasury.

The Bush administration has been reluctant to send funds through the rescue fund to companies not in the financial services field. One financial services lobbyist said he thought Treasury "could conceivably thread the needle" to invest in GMAC Financial Services and Ford Motor Credit but not to the automakers themselves. National Association of Manufacturers President John Engler said Monday that he did not think "any assistance can be unlimited" to the auto companies.

In remarks before the New America Foundation, Engler warned the cash burn rates of the Big Three automakers make a "pretty compelling case" that assistance may be necessary, but cautioned against the imposition of new regulations and taxes in return for a cash infusion. White House Press Secretary Dana Perino Monday signaled the Bush administration will be open to ideas from Congress on plans to accelerate $25 billion in Energy Department loans to auto companies. Expanding aid is also under consideration.

"If it wants to do anything in addition for the automakers, we'll certainly listen to ideas they have on how to accelerate the loans to viable companies, as laid out in the legislation," Perino said. She added Treasury officials are still reviewing the Pelosi-Reid letter. Rahm Emanuel, chief of staff to President-elect Obama, held off on Sunday on calling for Treasury to aid the Big Three.

Dodd and House Financial Services Chairman Barney Frank, D-Mass., also are concerned banks are not using federal aid to make loans, and instead in some cases are using it to help purchase other institutions. The Treasury has so far allocated $125 billion to nine major banks and is investing another $125 billion into smaller banks, thrifts and credit unions. Dodd's panel will hold a hearing Thursday on the program and Frank will hold one Nov. 18.

Darren Goode and Andy Leonatti contributed to this story.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

    Download
  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download
  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

    Download
  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.

    Download

When you download a report, your information may be shared with the underwriters of that document.