The Obama administration is prepared to impose fees on financial firms for as long as necessary to ensure that every cent spent on bailing out banks is repaid, Treasury Secretary Timothy Geithner said on Tuesday.
A proposed Financial Crisis Responsibility fee that is projected to raise $90 billion over 10 years could be extended if the cost of the bailout exceeds that amount, Geithner said in testimony before the Senate Finance Committee.
The fee can and will be extended until every penny of taxpayer assistance to the financial system has been repaid and the cost of the rescue to taxpayers is zero, Geithner said.
He told the committee that soaring budget deficits must be wrestled down to protect the country's economic future, but warned that doing so too quickly would risk a return to recession.
We must strike precisely the correct balance with the job- and growth-spurring measures required to assure recovery, Geithner said as he testified about the Obama administration's $3.8 trillion fiscal 2011 budget proposals. If we fail to do so, we risk driving the economy back into recession...and making it even harder to fix our problems.
Geithner laid most of the blame for the country's woes, including this year's projected $1.56 trillion deficit, on the former Bush administration.
On the day that President Obama took office, the budget deficit stood at $1.3 trillion -- 9.2 percent of GDP -- and the projected 10-year deficits for the following 10 years were $8 trillion, Geithner said.
These huge deficits are the result of the prior administration's decision to enact large tax cuts and a prescription drug bill without paying for them, he said.
The current deficit trends, which will see the deficit hit 10.6 percent of gross domestic product this year, are not sustainable, Geithner said, while again stressing the need to deal with the deficit gradually.
At one point, Geithner was pushed to say whether he thought ever-rising totals of U.S. debt were harming the dollar's value and asked if he even believed in a strong dollar.
Of course I (do), he replied sharply. In fact, that particular phrase and commitment of policy was first written in my office in 1995.
Geithner had long service in the Treasury Department in prior administrations, working his way through the ranks from 1988-2001 before moving on to the International Monetary Fund and later becoming the president of the New York Federal Reserve Bank. He took over as Treasury secretary at President Barack Obama's request a year ago.
Geithner appealed for a bipartisan effort to help get economic growth onto a sounder track that would enable the private sector to create more jobs.
We cannot afford an economic expansion like that of the past decade when...jobs grew more slowly than during any previous recovery...and much of our growth was built on the sands of a real estate and financial boom, he said.
He said the Obama administration supports setting up a bipartisan fiscal commission to explore ways to tackle oversize deficits, an idea that Republicans already have spurned.
(Editing by Leslie Adler)