U.S. Treasury Secretary Timothy Geithner said on Wednesday that there are "important indications" that the U.S. financial system is starting to heal.
In prepared remarks to the Senate Banking Committee, Geithner noted that with the help of lending facility with the Federal Reserve, new securities issuance has started to revive.
Spreads for AAA credit card receivables asset-backed securities(ABS) have fallen about 330 basis points from their peak. There has been more issuance of consumer ABS in the past two months than in the preceding five months combined.
"In our housing market, interest rates on 30-year mortgages have dropped to historic lows and refinancing has surged," said the Treasury chief.
"We have already seen a substantial amount of adjustment in our financial system," he said. "Leverage has declined, the most vulnerable parts of the non-bank financial system no longer pose the same risk, and banks are funding themselves more conservatively."
"These are all welcome signs," said Geithner, however, also warning that the process of financial recovery and repair will take time.
"Our work is not yet completed ... stability is not enough," he said.
"We need a financial system that is not deepening or lengthening the recession, and once the conditions for recovery are in place, we need a financial system that is able to provide credit on the scale that a growing economy requires," Geithner told senators.
Meeting this obligation requires early and aggressive action by the government to repair the financial system and promote the flow of credit, he said.
"It requires governments to take risks. It also requires the financial system to support sustainable economic expansion," said Geithner. "And it requires comprehensive regulatory reforms that deter fraud and abuse, protect American families when they buy a home or get a credit card, reward innovation and tie pay to job performance, and end past cycles of boom and bust."
"This is our commitment," the Treasury chief stressed.
(Xinhua News Agency May 21, 2009)