Projections of bigger savings from the financial bailout fund could be setting up a fight over how to use the anticipated $200 billion windfall. President Obama is likely to push for a new jobs program while congressional Republicans insist the money go to cutting the budget deficit.
The Government Accountability Office is expected to reveal in coming days that the Troubled Asset Relief Program, or TARP, will lose $141 billion over the long term instead of the $341 billion the government estimated in its August mid-session review. That difference is in part due to a better and faster-than-expected repayment from banks and other recipients of the bailout money.
"TARP has turned out to be much cheaper than we expected," Obama told reporters Monday during a White House visit with Turkey's Prime Minister Tayyip Erdogan, adding "but not cheap."
The president is set to give a speech on the economy Tuesday. Some have speculated that it would include a proposal to use the TARP savings for a new job-creation program as the nation's unemployment rate hovers around 10 percent.
On Monday, however, Obama declined to commit while leaving the door open, saying only that "some of the money can be targeted to deficit reduction," he said.
"The question is, are there selective approaches that are consistent with the original goals of TARP, for example making sure that small businesses are still getting lending that would be appropriate in accelerating job growth. And I will be addressing that tomorrow," he added.
White House spokesman Robert Gibbs told a media briefing, "No final determinations have been made," about how to spend the TARP savings.
The revised GAO figures take into account timely repayments. Bank of America said last week it was returning the entire $45 billion it borrowed as part of the program. That money will be added to the $71 billion already repaid to the government by financial institutions. The Treasury has also earned $10 billion in interest payments stemming from the bailout loans, an official told the Associated Press.
When Congress passed TARP in October 2008 during the depths of the financial crisis, TARP was authorized to spend $700 billion to bail out troubled financial institutions. In his first budget last February, the White House projected the need for $500 billion, including a $250 billion reserve. The August figure dispensed with the need for the reserve.
But Congress would need to go along with any such program, and GOP lawmakers are already skeptical of the White House stimulus efforts to date. Republicans are balking at the idea of yet another program, saying the money should be put back in the Treasury to reduce the massive fiscal deficit.
The Obama administration sees jobs creation as a key element in reviving the economy, because consumer spending accounts in one way or another for some 70 percent of gross domestic product.
Treasury Secretary Timothy Geithner indicated Friday that the administration was considering using any savings from TARP both on more job creation and to help reduce future budget deficits.
Geithner said the administration expected to have $175 billion in repayments from banks by the end of next year. Treasury has spent about $450 billion under TARP, including around $290 billion poured into banks.
Meanwhile, House Speaker Nancy Pelosi and other top Democrats have been drafting a jobs bill that would tap resources in the bailout program. Among the proposals being considered are funding as much as $70 billion in new transportation and infrastructure projects, providing new tax credits aimed at encouraging small businesses to hire workers, and providing additional aid to state governments to preserve public sector jobs.
The deficit for the 2009 budget year, which ended in September, hit a record $1.42 trillion and the administration in August projected a slightly bigger deficit for the current year.
From NPR reports and The Associated Press