While the Obama administration “regrets” the action taken in recent weeks to stabilize the major financial institutions, not doing anything would have resulted in consequences much greater than the cost of stepping in, a Treasury official said yesterday.
In testimony prepared for the House Committee on Oversight and Government Reform, interim assistant secretary Neel Kashkari — a holdover from the Bush administration who oversees the injection of government capital into troubled financial institutions — argued that all actions taken to date were needed in the face of “the potential imminent collapse of our financial system.”
If the financial system collapsed, he said, the current recession — with the large number of jobs lost and foreclosures — could have been far more severe.
Kashkari said the Treasury had no choice but to step in and offer additional aid to large institutions like American International Group Inc. and Citigroup, saying that their failures “would pose a systemic risk to our financial system and economy.”
However, “we regretted having to take those actions — to put so many taxpayer dollars at risk to support firms that had made bad decisions,” he said.
The decision still had to be made, Kashkari said, as the consequences of inaction were so severe — with the potential impact on the taxpayer from doing nothing “so much greater than the cost of intervention.”
— Market News International