Treasury: Billions still needed to backstop the economy

The U.S. economy could continue to need billions of dollars in government support for an indefinite period, a Department of Treasury report said Monday.

While substantial progress has been made in bolstering the U.S. financial sector, the Treasury report on "The Next Phase of Government Financial Stabilization and Rehabilitation Policies" said that billions in U.S. dollars are still needed to steady the economy.

"In those markets where conditions have improved, it is unclear whether the improvements achieved to date will persist without a period of continued government support," the report said. "We must temper our desire to terminate our extraordinary financial support with the recognition that there is still a risk of market disruption that would have a significant negative impact on American families, workers, and businesses."

"Some programs must continue until it is clear that the financial recovery achieved to date is fully self-sustaining," the report added.

The Treasury report is meant to provide a status update on the policies put in place by the Obama administration, as well as its strategies going forward -- especially to withdraw from some of the programs.

And while the report forecasts the end of several multi-billion dollar programs put in place by the government since the collapse of the financial sector a year ago, many of the programs seem to have indefinite support.

Bright spots include President Obama's decision to withdraw a $250 billion "placeholder" for additional financial support from his 2010 budget, as well as the end of several Treasury programs this fall. The report also foresees the end of several Federal Reserve programs in early 2010.

But the $750 billion Troubled Asset Relief Program (TARP) authorized by Congress almost a year ago will remain in place indefinitely.

"Uncommitted TARP resources give the government the capacity to respond to unanticipated financial shocks," the report says. "That capacity to respond with TARP resources continues to provide a critical backstop for financial stability."

"We are now in a position to adjust our strategy as we move from crisis response to recovery, from rescuing the economy to repairing and rebuilding the foundation for future growth," said Treasury Secretary Tim Geithner in a statement accompanying the report. "The critical imperative we face as a country is making sure that the same vulnerabilities in our system which gave rise to this recession are not allowed to trigger another. To do that, we must pass comprehensive regulatory reform legislation by the end of the year."