Banks that have received a portion of the $700 billion in Troubled Asset Relief Program funds could begin repaying the loans as early as next week, Herbert M. Allison, President Barack Obamas nominee to lead the TARP program, told the Senate Banking Committee during his confirmation hearing today.
Mr. Allison, who would head the Office of Financial Stability as an assistant treasury secretary upon Senate confirmation, would not estimate how much the banks are expected to repay, but noted that it is quite likely there will be a bump next week.
He also said he believes the TARP program was not meant to be a long-term permanent program.
The program is set to expire at the end of 2009, but it could be extended to October 2010 by Treasury Secretary Timothy Geithner. Once the program is ended, no more money would be invested in TARP, but money already invested may still be outstanding.
Thats why its also important that we have a strong and effective asset management capability within the Office of Financial Stability, and that would be one of my responsibilities if Im confirmed, as well, Mr. Allison said.
Mr. Allison said efforts to restore stability in financial markets have helped lower credit spreads, increase home sales and strengthen banks, but he warned against complacency.
These are all very positive signs, he said. We also see housing prices are still falling, the commercial real estate market is still under pressure, small businesses are still having some difficulty. We still have credit spreads higher than they historically had been and should be. Theres still a great deal of work to be done here, and I dont think at this point we ought to become complacent and think that because the banks are starting to repay some of this money that the crisis is over and we can just go ahead.
Mr. Allison most recently served as CEO of Fannie Mae when it was put into conservatorship in September; prior to that he was chairman and CEO of TIAA-CREF and president of Merrill Lynch. If confirmed, he would replace Neel Kashkari, who stepped down May 1.
The committee did not vote on Mr. Allisons nomination.