Treasury Secretary Timothy Geithner formally extends TARP until October [Updated]
In a move the Obama administration has been telegraphing for weeks, Treasury Secretary Timothy F. Geithner today triggered the near-automatic extension of the $700-billion Troubled Asset Relief Program, or TARP, until Oct. 3, 2010.
In a letter to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, Geithner said the administration was winding down its use of the controversial bailout fund but wanted the continued flexibility provided by its mountain of money.
Under the law that created TARP, the program would end on Dec. 31 unless the administration formally requested an extension. Congress does not have to approve the request.
Geithner told the congressional leaders that "the recovery of the financial system remains incomplete. And near-term shocks to that system could undermine the economic recovery we have seen to date."
He noted that new projections show there will be $200 billion less in losses from the fund than expected back in August. President Obama plans to use the additional financial flexibility to spend billions of dollars more on new efforts to stimulate job growth.
[Updated at 10:15 a.m.: After meeting with Pelosi, Reid and other congressional leaders today to push for job-creation legislation, Obama said the administration was winding down TARP. "This program has served its original purpose, and the cost has been much lower than we expected, giving us a chance to pay down the deficit faster than we thought at the time and also allowing us to invest in job creation on Main Street rather than on Wall Street."]
The administration said it will not spend TARP money directly on the job-creation initiatives Obama outlined Tuesday. The only use of the funds to stimulate jobs will be continuing Treasury efforts to spur lending by banks to small businesses.
Those efforts are one of the few areas where there might be new commitments of TARP money in 2010, Geithner said, along with spending on easing home foreclosures, providing capital to small and community banks, and increasing spending on a program to improve the securitization market for consumer and small business loans.
"Beyond these limited new commitments, we will not use remaining ... (TARP) funds unless necessary to respond to an immediate and substantial threat to the economy stemming from financial instability," Geithner wrote. "As a nation, we must maintain capacity to respond to such a threat."
He said the administration does not expect to use more than $550 billion from TARP before the program ends, as banks continue to pay back the money given to them.
But Republicans have called on Obama to let TARP expire at the end of this year. Rep. Jeb Hensarling (R-Texas), who sits on the special panel Congress created to oversee TARP, protested Geithner's move today.
“The Obama administration just can’t seem to let go of the $700 billion in ‘walking-around money’ taxpayers were forced to put on the line to bail out Wall Street last year," Hensarling said. "What was supposed to be an emergency capital injection to thaw frozen credit markets has morphed into a revolving bailout fund to advance the Democrats; political, social and economic agenda.”
[Updated at 10:18 a.m.: The Congressional Oversight Panel released a report today saying that TARP, along with other government programs, "can be credited with stopping an economic panic." But the report said the program's progress toward other goals, such as easing mortgage foreclosures, is still unclear.]
-- Jim Puzzanghera
Photo: Timothy Geithner. Credit: Joshua Roberts / Bloomberg News