WASHINGTON (CN) - Treasury Secretary Timothy Geithner defended his decision to prolong the Troubled Asset Relief Program before a skeptical oversight panel Thursday. Announcing his decision to extend the program through October of next year, he said, "I don't understand why this is so complicated."
Geithner pointed to the "remarkable" improvements in the nation's economy. He told the critics on the panel, "The economy would not be growing today without TARP," he said."It would be deeply irresponsible, only a year after this recovery process, to walk away."
The $700 billion program was set to expire at the end of the month, but Geithner announced Wednesday that it would continue into October of next year as part of an effort to prudently shut down the bank bailout program.
Harvard University law professor Elizabeth Warren, who chairs the independent panel, agreed that TARP was important in saving the economy from collapse, but criticized some of the program's shortfalls, noting especially that the program still has trouble getting bank loans to small businesses.
"There must never be a TARP 2.0," she said firmly.
Paul Atkins, a former member of the Securities and Exchange Commission, criticized the program's extension, calling attention to the difference in circumstances between October 2008, when TARP was originally adopted, and now. "We're not afraid that community banks are going to go under," he said of today's market.
A report released by the panel Wednesday characterized TARP as an important player in stabilizing the American financial system but it nonetheless cited weaknesses, many of which were voiced by panel members during the hearing.
One of the report's major criticisms is that the "overwhelming fiscal response" of the program provides majors financial firms with an "implicit guarantee" of a bailout and it said that unwinding this guarantee would be a long-term challenge.
Geithner replied by saying that the market continues to need support, and warned against drying up the available credit.
Officials announced this week that banks are buying back their loans faster than expected, and that the program will cost $200 billion less than expected.
"We now expect a positive return from the government's investments in banks," Geithner said.
But the investments in AIG, Chrysler and General Motors are not likely to be fully paid back, he said.