Smaller banks get reassurance from Treasury Secretary Geithner

Treasury Secretary Timothy Geithner speaks Wednesday at the Independent Community Bankers of America policy summit.

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Treasury Secretary Timothy Geithner speaks Wednesday at the Independent Community Bankers of America policy summit.

WASHINGTON — The Obama administration will use bailout money repaid by large banks to provide additional capital infusions to community banks, Treasury Secretary Timothy Geithner said Wednesday.

In remarks to an association of community bankers, Geithner also said the administration is moving forward with plans to streamline financial rules as part of a broader overhaul to be unveiled in the next several weeks.

Banks with less than $500 million in assets will have six months to apply for the funds, Geithner said. They also will be able to apply for larger amounts than banks were allowed to request during the current round of investments.

The Treasury Department has said it expects banks to repay $25 billion in government funds over the next year.

While Geithner's remarks to the Independent Community Bankers of America drew applause, it's not clear how many small banks want more government aid.

Many say they are healthy, don't need the money and are wary of the limits on executive compensation and other restrictions Congress has imposed on bailout recipients.

Twelve smaller banks have returned almost $1.2 billion in government funds so far. More than 570 banks have received about $198 billion in TARP funds.

Due largely to the government's efforts, "the financial system is starting to heal" and "a substantial part of the adjustment process is now behind us," Geithner said.

Still, the administration wants to move on an overhaul of the nation's financial rule book "while memory of the damage of the crisis is still acute," he said.

Geithner also drew applause when he said the administration supports increasing the cap on the FDIC's authority to borrow from the Treasury, to $100 billion from $30 billion.

That idea is popular because it could allow the FDIC to reduce the fees it charges banks.

Smaller banks get reassurance from Treasury Secretary Geithner 05/13/09 [Last modified: Wednesday, May 13, 2009 8:59pm]

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