The Treasury Department released a letter with responses to 10 questions posed by a recent report that criticized its management of the Troubled Asset Relief Program.
The letter, from Neel Kashkari, interim assistant secretary for financial stability, went to professor Elizabeth Warren, chair of the Congressional Oversight Panel. Asked if the Treasury's strategy is working to stabilize the markets, he said yes.
"The most important evidence that our strategy is working is that Treasury's actions, in combination with other actions, stemmed a series of financial institution failures," said the letter. "The financial system is fundamentally more stable than it was when Congress passed the legislation."
Kashkari insisted that the strategy is helping to reduce foreclosures, citing the HOPE NOW program and actions aimed at buying mortgage-backed securities from Fannie Mae and Freddie Mac.
Asked what financial institutions are doing with the TARP money, Kashkari responded indirectly.
"While confidence is low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans," said the letter. "As confidence returns, we expect to see more credit extended. This lending won't materialize as fast as anyone would like, but it will happen much faster as a result of having used the TARP to stabilize the system and to increase the capital in our banks."
Asked if the public is receiving a fair deal, Kashkari answered yes. "The American people have benefited from the financial rescue package," he insisted. "The financial crisis, and the ensuing economic downturn, would have been far worse without this legislation and our implementation of it."
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