WASHINGTON - US TREASURY Secretary Timothy Geithner said on Wednesday that the financial system 'is starting to heal' as a result of massive efforts to rescue banks and steady the housing market.
In a speech to community bankers, Mr Geithner said the adjustment in the financial system has largely been accomplished as a result of government rescue efforts.
'The financial system is starting to heal,' he said.
'Concern about systemic risk has diminished. And overall lending conditions have started to improve.' Mr Geithner said this is reflected in easier borrowing conditions for corporate bonds and interbank lending as well as for mortgages, where interest rates dropped to a historic low.
'These are all welcome signs, but the process of financial recovery and repair is going to take time,' he said.
Mr Geithner said the system is responding to efforts by the Federal Reserve and Treasury to get more credit flowing and keep rates low, including moves to clean up so-called 'toxic assets' that are weighing on banks' ability to lend.
Also important were the 'stress tests' conducted on major banks, which he said would 'bring greater transparency and new capital into the financial system'.
'We have already seen a substantial amount of adjustment in our financial system. Leverage has declined. The more vulnerable parts of the non-bank financial system no longer exist,' he said.
'Banks are funding themselves more conservatively. These are necessary changes, and there is more restructuring ahead for the financial industry as a whole. But a substantial part of the adjustment process is now behind us.' -- AFP