Treasury Secretary Timothy Geithner is making the case for extending the Troubled Asset Relief Program (TARP) through Oct. 3 of next year.
According to his testimony before the Congressional Oversight Panel (COP), extending TARP authority is necessary in order to increase lending to small businesses and stabilize the housing market through foreclosure prevention.
‘[T]he recovery of our financial system remains incomplete,’ Geithner said in a letter to lawmakers, including Henry Reid and Nancy Pelosi, this week. "And near-term shocks to that system could undermine the economic recovery we have seen to date."
Although the Emergency Economic Stabilization Act of 2008 provides $700 billion in TARP authority, Geithner told the COP that the plan is to use "significantly less" than that total. The Treasury's first annual TARP report shows that the Office of Financial Stability, which implements TARP, disbursed $364 billion during the period ended Sept. 30.
Bank of America repaid $45 billion of TARP funds earlier this week, bringing the total amount of repaid monies to $118 billion. The Treasury estimates that total bank repayments "could reach up to" $175 billion by the end of the year.
Geithner also outlined his exit strategy for TARP, breaking it down into the following four elements:
- terminating and winding down programs that have supported large financial institutions;
- limiting new investments to housing, small business and securitization markets that facilitate consumer and small-business loans;
- maintaining the capacity to respond to full potential threats; and
- continuing to manage equity investments acquired through TARP in a commercial manner, while protecting taxpayers and unwinding those investments as soon as practicable.
Geithner also said new commitments in 2010 would be limited to three areas: foreclosure mitigation, capital support for small and community banks, and a possibly increased commitment to the Term Asset-Backed Securities Loan Facility.
SOURCE: Treasury Department