US Treasury places new restrictions on financial rescue plan

January 28th, 2009 - 5:21 am ICT by IANS  

Barack ObamaWashington, Jan 28 (DPA) The US Treasury Department Tuesday unveiled new rules that will govern its efforts to stabilise the crumbling US financial sector, including clamping down on lobbyists’ influence and prioritising bank lending to the wider economy.The announcement offered some fresh indications of how President Barack Obama’s administration will manage the $700-billion financial rescue package approved by Congress in October.

About half of the funds have already been invested in banks by former president George W. Bush’s administration, which was criticised for injecting cash into struggling banks without ensuring financial institutions would restart lending.

Obama has indicated that more plans to address the financial collapse will be unveiled in the coming weeks. He is also asking Congress to pass a separate $825-billion economic stimulus package to help pull the US out of recession.

The Federal Reserve, which has slashed interest rates to near-zero and injected more than $1 trillion into banks through a series of unprecedented loan programmes, was meeting Tuesday and Wednesday to consider its own moves.

Loans for everything from homes to cars and small businesses have been restricted by banks that are desperately holding onto cash reserves after suffering hundreds of billions of dollars in losses from the downturn of the US housing market.

Among the measures announced by the Treasury Department Tuesday was a commitment to monitor the lending patterns of financial firms, promises of greater transparency and limits on the influence of lobbyists over where the funds are allocated.

“American taxpayers deserve to know that their money is spent in the most effective way to stabilise the financial system. Today’s actions reaffirm our commitment towards that goal,” said Treasury Secretary Timothy Geithner, who was sworn into his new position Monday.

Also Tuesday, William Dudley, a long-time US Federal Reserve official, was named to succeed Geithner as the chair of the central bank’s New York branch.

Dudley, 56, will head the Federal Reserve Bank of New York, which implements the Fed’s monetary policy on Wall Street and is one of 12 regional branches of the US central bank.

Geithner led the New York Fed from 2003 until taking over at Treasury Monday.

Dudley’s appointment by the branch’s board of directors marks continuity for the post at a crucial time for the US financial system. He formerly led the New York Fed’s Markets Group and helped develop some of the novel tools the central bank has used in a bid to stabilise the financial sector since September.

Dudley has also served as investment firm Goldman Sachs & Co’s chief economist.

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