Obama likely to back idea to use TARP funds to create jobs
Saturday, December 5, 2009
During a speech about the economy next week, President Obama is likely to endorse using some of the government's $700 billion financial bailout for a new jobs-creation program, the White House said Friday.
"The president thinks we should and must do everything in our power to create an environment for job growth and job creation," press secretary Robert Gibbs said. When asked whether Obama will talk on Tuesday about the use of bailout funds, Gibbs said, "I think that's likely."
About $139 billion of the Troubled Assets Relief Program, or TARP, remains unallocated. Banks have paid another $10 billion in interest and dividends to the Treasury Department and returned about $71 billion in aid, Treasury reported last month. This week, Bank of America announced it would repay another $45 billion.
Treasury Secretary Timothy F. Geithner has advocated against spending unallocated TARP funds to demonstrate the administration's commitment to deficit reduction. But House Speaker Nancy Pelosi (D-Calif.) and other top Democrats have been crafting a bill that would tap the bailout program to create jobs. Geithner said this week that lower-than-expected losses on the program and "very substantial" repayments from once shaky banks will make it possible to accomplish both goals.
Using TARP funds for job creation would likely require additional legislation, though White House officials would not provide details of the president's plans ahead of his speech. When asked whether Obama endorses Pelosi's ideas to use a portion of the bailout money, Gibbs said: "It's certainly being looked at, yes."
Gibbs said the president is likely to talk about multiple ideas for job creation, some of which would require congressional approval. Next Tuesday's speech at the Brookings Institution will follow a day-long jobs summit Thursday and a trip to Allentown, Pa., Friday to highlight the plight of workers. The unemployment rate is near a 26-year high, though the Labor Department reported Friday that the rate fell to 10 from 10.2 percent in November.
A senior Democratic aide said House Democrats are mulling the shape of a jobs bill, which they hope to vote on later this month. The parameters of that package came into sharper focus this week, particularly at a meeting of rank-and-file members on Thursday. Among the options under consideration are an extension of safety-net programs, including unemployment insurance, health benefits for jobless workers and food stamps. Because those provisions respond to the economic downturn, they would be considered emergency spending, the aide said.
Democrats are also weighing provisions targeted directly at jobs creation. That part of the package, which would be financed with unused TARP money, could include as much as $70 billion in transportation and infrastructure projects, as well as new tax credits aimed at encouraging small businesses to hire new workers. Democrats are also considering additional aid to state governments, which face massive deficits over the next few years, to preserve public-sector jobs and avert state tax hikes, which could hamper the economic recovery.
The aide said Pelosi has yet to decide the size of the package and how much of it would be paid for.
Republican leaders in the House say using TARP funds for a jobs bill would violate the intent of the law.
"We passed TARP to avoid an economic calamity, and I have been probably the biggest critic of how that money was actually spent," House Minority Leader John A. Boehner (R-Ohio) said on Bloomberg TV this week. "But the money went out to financial institutions. Now it's coming back, and as it comes back, what we ought to do with that money is use it to reduce the budget deficit. Nobody ever had any idea that when this money came back that we'd go ahead and spend it on something else."
Other lawmakers say they simply want the bailout to come to an end. Sen. John Thune (R-S.D.) introduced a bill that would prevent Treasury from launching new TARP initiatives after Dec. 31.
TARP remains hugely unpopular. Many lawmakers have decried the initiative -- proposed by the Bush administration and continued under Obama -- for using tax dollars to aid the big financial firms that triggered the economic crisis. A firestorm erupted when Treasury revealed that multimillion-dollar bonuses were being paid to executives of bailed-out firms, including American International Group.
But Treasury is all but certain to extend the program for another year, since it is still rolling out TARP-funded initiatives for small business, community banks and homeowners, and it wants to assure financial markets that the administration has enough money on hand to address any future financial crisis.
White House aides are continuing to discuss how to structure the extension and when to announce it. A decision must be made by Dec. 31. The TARP legislation grants the Treasury secretary the power to extend the initiative until October 2010, two years after it was signed into law.
Staff writer Lori Montgomery contributed to this report.