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Geithner grilled by watchdogs

A bailout oversight committee on Tuesday asked Treasury Secretary Tim Geithner to explain the agency's handling of the controversial $700 billion bailout program.

Congressional Oversight Panel Chairwoman Elizabeth Warren, a Harvard University law professor, stressed the need for more transparency and accountability.

"People want to see action described in terms that make sense to them and that seem fair," she said. "They want to see that taxpayer funds aren't being used to shield financial institutions from the consequences of their own actions."

The hearing marked the first time Geithner has publicly appeared before the panel, which was established as part of the Troubled Asset Relief Program passed by Congress last October at the height of the global financial panic.

Geithner mounted his strongest defense of Treasury's actions over the past few months, as the agency has become the target of several critical oversight reports.

"We are not a private investment firm, we are the government of the United States. When we act, we don't do it for the benefit of those banks," he said. "You can't look at ... the narrow prism of the transaction itself. You have to look at the broader benefit it takes."

Warren has been particularly critical of Treasury in the past few months on behalf of the five-member oversight panel.

Her often biting criticism of the government's handling of the bailout hasn't always been shared by other members. The last report the group issued was approved 3-2. One panelist, former Sen. John Sununu of New Hampshire, a Republican, accused the panel of veering off its mission.

Several panelists asked Geithner to explain how the bailout program changed course so much over the past six months, and whether it was effective.

"It is now being used to aid the automakers, which leads to the question of 'who's next?' The airline industry? The trucking industry? At what point does Starbucks get in line for a bailout?" asked Rep. Jeb Hensarling, R-Texas.

When Warren asked why regulators appear to have treated financial firms with a lighter touch than the auto industry, referring to the replacement of General Motors Chief Executive Rick Waggoner, Geithner disagreed. He pointed out that Treasury also replaced management at Freddie Mac and Fannie Mae, the government sponsored enterprises.

In addition, Geithner hinted that the administration was willing to consider such actions in the financial sector as well. Geithner said that, in the future, regulators intend to make sure those firms that need an "exceptional level" of bailout help "emerge stronger than weaker."

The panel has had impact in one respect. Last month, Warren complained to Congress that Treasury had been ignoring the panel's requests for more detailed information. On Tuesday, Warren complimented the department and suggested it was providing far more information.

Treasury is now briefing the Congressional Oversight Panel weekly, and on Monday turned over 10,000 documents to the panel in response to a March 24 request.

"This progress is certainly encouraging, and I hope it is indicative of a change in the way your department plans to handle future requests," said Damon Silvers, an attorney for the AFL-CIO.

In a written statement, Geithner pledged to work with TARP overseers.

"Transparency will not only give the American people comfort in our stewardship of these funds, it will give the markets confidence that we are stabilizing and strengthening the financial system," Geithner said.