Congress refocuses on economy, Geithner

Pablo Martinez Monsivais/AP
Sen. Jon Kyl (R) of Arizona grilled Geithner on his tax lapses – and his contention that the stimulus would be speedy.

After all the festivity and feel-good of Tuesday's inauguration, Congress got right back to work Wednesday with tough questions for Tim Geithner, the Treasury secretary-nominee.

His tax mistakes -- boneheaded though they were -- paled in comparison with the big worries about the economy. Even Democrats were tough on the nominee of the president they'd just lauded the day before.

Two of the senators' most pressing questions: How quickly would the stimulus be spent? How would banks be regulated after their disastrous entanglement with complex mortgage-backed securities?

"I am tired of these exotic instruments," said Sen. Maria Cantwell (D) of Washington. "There's nothing exotic about what's happened to our economy."

She pressed Mr. Geithner repeatedly about reining in banking excesses through regulation. He declined to give any specifics, saying President Obama would be presenting a plan to Congress in a few weeks.

Sen. Olympia Snowe (R) of Maine asked why the original bailout money was spent on injecting money into banks rather than buying up their troubled assets, as the Bush administration had originally proposed. "Clearly, it hasn't been [working] at this point. Do you think it's working?" she asked.

"I absolutely believe that actions taken [then] have made a very substantial impact in avoiding the risk of a much more damaging deleveraging of the financial system," Geithner said. He also promised to reform the program so that it would be more effective and transparent.

Will the Obama plan stimulate the economy speedily? asked a skeptical Jon Kyl (R) of Arizona, quoting Congressional Budget Office estimates that much of the money wouldn't be distributed for more than a year.

"We think we can do substantially better than the CBO suggests," Geithner responded. "We want to have strong force -- quickly."

The new administration's speed will be crucial, because the history of stimulus in the United States has been that it usually came too late, feeding inflation instead of fighting deflation.

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