UPDATE 1-White House’s Summers backs Geithner bank strategy

(Adds comments on costs of resolving bank crisis)

WASHINGTON, Jan 31 (BestGrowthStock) – The White House’s top
economic adviser Lawrence Summers gave some backing to Treasury
Secretary Timothy Geithner on Sunday, saying Geithner deserves
an “enormous amount of credit” for his strategy in stabilizing
U.S. banks.

The comment, made on CNN’s “Fareed Zakaria GPS” program,
provided a public White House endorsement of Geithner after a
week in which the Treasury chief was vilified by members of
Congress for his role in the 2008 bailout of American
International Group’s (AIG.N: ) its subsequent payment of $62
billion in taxpayer funds to large banks.

After Geithner arrived at the Treasury a year ago, he
launched a program to “stress-test” the top 19 U.S. banks to
determine their capital needs. The tests, along with
improvements in financial markets, helped pave the way for many
of the institutions to sell shares to private investors.

“I think Secretary Geithner deserves enormous credit for
directing the strategy that was about private sector capital
raising, that was about stress-testing for transparency to
build confidence,” Summers said on the program.

One Republican lawmaker asked Geithner to resign during a
House of Representatives Oversight and Government Reform
Committee hearing last week examining the AIG bailout and why
the New York Federal Reserve under his leadership supported
limiting public disclosures about the bank payments, which some
have labeled a “back door bailout.”

The AIG matter will continue to be investigated by the
panel and by the federal bailout program’s special inspector

Summers also said he believed that the ultimate cost to the
federal government of the financial bailout programs — most
recently estimated at around $141 billion, would be less as a
percentage of U.S. economic output than the cost of resolving
the savings and loan crisis in the 1980s and 1990s.

“The cost of resolving this banking crisis — the most
serious in seventy years — because of the way it is being
managed, looks like there’s going to be much less (cost)
relative to the economy than the cost of the S&L crisis or the
cost of crises in other countries. So I think you have to
regard the approach as a very considerable success,” Summers

The Obama administration is expected to update its estimate
of taxpayer losses from the Troubled Asset Relief Program on
Monday with the release of its proposed fiscal 2011 budget.

The Federal Deposit Insurance Corp. in 2000 estimated the
net taxpayer cost of resolving the S&L crisis from 1986 to 1995
at about $153 billion.

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(Reporting by David Lawder, editing by Maureen Bavdek)

UPDATE 1-White House’s Summers backs Geithner bank strategy