Geithner says hard to price toxic assets

By Glenn Somerville

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Tuesday that most U.S. banks have enough capital to keep lending but a pile of bad debts is fostering doubts about their health and slowing a recovery.

Testifying before the Congressional Oversight Panel that monitors the Treasury's efforts to bail out troubled banks, he said toxic assets were "congesting" the U.S. financial system and hindering efforts to get credit flowing normally.

"Uncertainty about the value of legacy assets is constraining the ability of financial institutions to raise private capital," Geithner said, adding that he hoped a public-private investment program will improve the ability to put a price on troubled mortgage and other assets.

The government has injected hundreds of billions of dollars into banks to help them weather the damage from bad mortgage loans and is running stress tests on 19 of the largest banks to see whether they are prepared to deal with a further downturn.

In a letter to panel chairman Elizabeth Warren, Geithner said the Treasury still has about $134.5 billion (91.6 billion pounds) available out of an originally approved $700 billion for bolstering banks' capital and said he wouldn't need to ask Congress for more.

As Geithner testified, demonstrators silently held pink posters aloft behind him criticizing the government bailout effort for big banks that many blame for the reckless lending that helped precipitate the current lending and credit crisis.

STOCKS GET A LIFT

"Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators," Geithner said, a comment that gave stocks a lift in morning trading.