Fed winds down rescues

The Obama administration has begun to unwind several government programs used during the past year to rescue the ailing economy, an encouraging sign that the nation’s financial outlook is improving.

The administration said Thursday said that a program used to guarantee up to $3 trillion in money market mutual fund assets will end on schedule next week. It said the program had no direct cost to taxpayers and earned more than $1 billion in fees paid by the mutual fund industry.

That program was established at the height of the financial crisis a year ago after a large money market fund called the Reserve Primary Fund “broke the buck” - meaning the value of its underlying assets fell below $1 for each dollar investors put in.

A series of emergency programs initiated by the Federal Deposit Insurance Corp. (FDIC) and the Federal Reserve has also begun to phase out, the administration said.

Treasury Secretary Timothy F. Geithner told a congressional panel Thursday that these programs and other government-led initiatives helped pull the economy “back from the edge of the abyss.”

President Obama will give a speech about the financial crisis Monday in New York, marking the anniversary of the collapse of Lehman Brothers, the White House said Thursday.

The fall of Lehman last year precipitated a worldwide financial crisis. Mr. Obama made financial regulatory reform a key platform of his candidacy and is now trying to push reform measures through Congress.

Mr. Geithner gave an upbeat assessment of the economy Thursday, saying the nation is on better financial footing now than earlier this year to emerge from recession, though he cautioned that a full recovery will not happen any time soon.

“It will take awhile to get through this, and it will take us longer because we’re going to do it right,” he said during a hearing of the Congressional Oversight Panel, which monitors the $700 billion Troubled Asset Relief Program (TARP).

The secretary’s testimony was met with skepticism by some members of the independent watchdog panel, which a day earlier released its latest monthly report on TARP that criticized Treasury’s handling of $81 billion in funds to rescue Chrysler Group LLC and General Motors Corp.

Panel member Rep. Jeb Hensarling, Texas Republican, a strong TARP critic, said the program was intended to bail out troubled financial institutions, not failing Michigan automakers.

“Is AT&T a financial institution? Is American Airlines a financial institution?” Mr. Hensarling said. “Who will you bail out [next], and who will you not bail out?”

The Treasury secretary responded that he doesn’t expect the TARP program to be expanded “beyond the scope of the actions we’ve taken.”

Mr. Geithner added that the administration is starting to close out a number of the transactions with bailed-out financial institutions first implemented last fall in the wake of the financial crisis and expects to receive a further $50 billion in repayments from banks over the next 18 months.