WASHINGTON — Treasury Secretary Timothy Geithner said Thursday that the $700 billion financial bailout will end up costing taxpayers less than congressional analysts have estimated.
The Congressional Budget Office has estimated that taxpayers will lose $25 billion on the rescue of banks, other financial institutions and automakers that came in at the peak of the crisis in the fall of 2008. Geithner told a hearing by a congressionally-appointed panel that it will cost less than that.
“Those estimates are now around $25 billion,” Geithner said. “They are too high, in my judgment. Ultimately, they’ll be lower.”
Geithner didn’t provide another cost estimate.
Measured in cost, he said, the bailout “will rank as one of the most effective crisis-reponse programs ever implemented.”
The most important fact, he said, is that the government’s combined investments in banks, financial institutions, automakers and credit markets “will show a positive return,” he said. “The losses will be limited to the amount we spend on our housing programs.”
Geithner said the U.S. financial system today “is in a much stronger position than it was before the crisis.”
Still, he acknowledged, with unemployment hovering at an average 10 percent, “Our work is not done. … The damage is still profound and tragic.” He also said the housing market remains weak.
Geithner said the government is trying to keep as many struggling borrowers as possible in their homes in several programs and is putting downward pressure on mortgage rates through agreements with finance companies Fannie Mae and Freddie Mac. The government has been buying securities backed by mortgages that are issued by Fannie and Freddie.
Sen. Ted Kaufman, D-Del., the panel’s chairman, said the economy “is in a tremendously better place today than it was” before the financial rescue came in.
“But we must not forget the pain that continues to plague so many Americans,” he said. “Fifteen million Americans still cannot find a job. As many as 13 million families will lose their homes to foreclosure in the next few years.”