Sunday, February 8, 2009

Geithner Says Banks Must Modify Loans

Treasury Secretary Timothy Geithner on Saturday told lawmakers that financial institutions that receive government assistance will have to make loan modifications and meet other new standards, according to Democratic sources.

Geithner, during a briefing with House of Representatives' Democrats at a retreat in Williamsburg, Virginia, was asked about a New York Times report that the Obama administration would not require banks to increase their lending as part of revamped government effort to restore stability to the financial industry.

According to the sources, who asked not to be identified, Geithner said: "We are not doing what they wrote ... Institutions that get assistance will have to participate in loan modifications and meet other standards that we set.""Public assistance is a privilege, not a right," the sources said Geithner told lawmakers.

The sources said Geithner told the lawmakers that fixing the banking system. "It is going to take time for it to work but it will work," he said, according to the sources.

Geithner on Monday will unveil the Obama administration's plans for dealing with an ongoing credit crisis and outline how it will spend what remains in a $700 billion financial bailout fund approved by Congress in the fall.

The Democratic sources did not indicate that Geithner provided any specifics on that plan during his meeting with House Democrats attending an annual retreat. Besides answering questions on how the administration will battle the crisis, the session was a chance for lawmakers to get an opportunity to get to know the new Treasury secretary better, sources said.

Geithner is not expected to ask Congress for more funds to clean up a banking system weighed down by bad mortgage-related assets, but some lawmakers believe the Obama administration could ask for more money later in the year.

"We believe liquidity needs to be restored and in order to do that we need to see lending proceed," House Majority Leader Steny Hoyer told reporters before meeting with Geithner.

Sources: Reuters, The New York Times

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