WASHINGTON — The U.S. may extend a $90 billion fee on the country's largest banks beyond the planned 10 years if the government hasn't recouped the cost of the financial rescue, Treasury Secretary Timothy Geithner said Tuesday.
In testimony to the Senate Finance Committee, Geithner said the U.S. was committed to cutting its huge budget deficit. But he cautioned that deep and immediate budget cuts were not possible because it could damage the economic recovery.
"While government support for the economy is critical now, we cannot let our future deficits and debt continue to grow faster than our economy without hurting future investment and income growth," Geithner said.
Discussing the White House's fiscal year 2011 proposed budget, Geithner said that prompt job creation is an immediate goal. Although the U.S. economy is expected to expand by a healthy 2.7% in 2010, the budget predicts that probably won't be enough to prevent unemployment from staying high for several years.
"This budget is designed to create the conditions for the private sector to grow so that businesses, small and large, can create new jobs," Geithner said. "To do this, we need serious financial reform."
A key Obama administration initiative is a fee aimed at the nation's largest financial institutions, the recipients of some of the most government aid since the start of the financial crisis. Geithner said the fee will ensure that taxpayers are repaid for their assistance.
"The (bank) fee can and will be extended until every penny of taxpayer assistance to the financial system has been repaid and the cost of the rescue to taxpayers is zero," Geithner said.
President Barack Obama defended the bank fee is his State of the Union address last week. He has said banks have a responsibility to make taxpayers whole for the financial-sector bailout and should pay the fee by rolling back big bonuses.
Geithner said changes to health care and education, as well as more investments in research funding, are necessary for future growth.
"The market alone cannot solve these challenges on its own. Government needs to address these challenges in order to provide the foundation for a strong, dynamic private sector," he said.
He also stressed the need for policy makers to deal with the nation's long-term fiscal position.
"This will be a difficult task. It will require tough and at times politically unpopular choices," Geithner said.