Treasury Secretary Timothy Geithner on Wednesday moved to extend the government's $700 billion bailout fund into October 2010 and pledged to deploy no more than $550 billion of it.
Geithner, in letters to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, said the extension of the Troubled Asset Relief Program (TARP) until Oct 3, 2010, would allow the Obama administration to use bailout funds to fight home foreclosures and boost small business lending.
This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats, Geithner said in the letters.
Under the bailout statute that created TARP last year, Geithner had to decide by year end whether to extend the program or let it expire. Many Republicans in Congress have called for it to be terminated and unused funds used to reduce the federal budget deficit.
Geithner said the Treasury expects up to $175 billion in repayments from bailout recipients by the end of 2010 and substantial additional repayments thereafter. These funds, along with the $150 billion in TARP resources that will not be deployed, should allow us to commit significant resources to pay down the federal debt over time and slow its growth rate over time.
Geithner said he expects that the TARP will ultimately cost U.S. taxpayers at least $200 billion less than the $341 billion projected in August. This includes $25 billion of potential costs from new TARP commitments in 2010, the majority of which would come from mitigating foreclosure for responsible American homeowners.
Geithner said the new TARP commitments would be limited in 2010 to the housing market, capital for small banks and other efforts to boost small business lending, and increased support for the Federal Reserve's Term Asset-Backed Securities Loan Facility, which has been credited with reviving securitization of consumer, small business and commercial mortgage loans.
(Reporting by David Lawder; Editing by Padraic Cassidy)