Tens of billions remain in bank bailout fund
WASHINGTON — The government has tens of billions of dollars left in the eye-popping $700 billion bank bailout fund created last fall, prompting a debate in Congress over what to do with it.
The Treasury Department wants to keep the money at its disposal in case the economy gets worse. But fiscal conservatives like Sen. Judd Gregg of New Hampshire and Rep. Spencer Bachus of Alabama, both Republican, want the money kept to pay down the national debt.
Meanwhile, a group of liberal Democrats led by Massachusetts Rep. Barney Frank, chairman of the House Financial Services Committee, say at least a portion of it should be spent to help cash-strapped homeowners.
“We clearly face a new wave of foreclosures” because of rising unemployment, Frank said at a hearing Thursday.
The question of what to do with the money will grow more pressing in coming months as Congress takes a step back to consider the fate of the Troubled Asset Relief Program, or TARP.
Lawmakers had rushed to approve the money in October 2008 as Wall Street sat on the brink of collapse. Since then, even as the economy continues to wobble and high unemployment threatens the prospects for a speedy recovery, major banks have repaid $70 billion in assistance and expressed growing optimism about their ability to function without government assistance.
TARP is set to conclude at the end of the year unless Treasury Secretary Timothy Geithner extends it through fall 2010.
The Government Accountability Office, the nonpartisan investigative arm of Congress, estimated on Thursday that the government has about $328 billion left in the fund that hasn’t been spent or legally committed.
According to GAO, the government has disbursed approximately $339 billion and promised $102 billion more. That leaves some $259 billion in the fund plus the $70 billion banks have repaid.
The Treasury Department says it already has plans for some of the remaining money and predicts the available funding in TARP will be much lower, about $127 billion.
Geithner also has indicated he wants any extra money in the program left to his disposal if it’s needed. In a letter to Gregg, the secretary said any additional “headroom” under the program’s $700 billion cap provides “additional flexibility to Treasury in its efforts to stabilize the economy and build the foundation for long-term economic growth.”
But for many lawmakers, money already approved by Congress to aid the economy is ripe for the picking. Frank wants to use dividends earned through government-owned stock in ailing banks to go toward affordable housing programs.
Republicans on the House Financial Services Committee disagree.
“We need to end the bailouts and return that money to the taxpayer,” said Bachus, R-Ala.
Meanwhile, the No. 2 official at the Federal Reserve resisted calls in Congress to subject the central bank to oversight by a federal watchdog agency.
Fed Vice Chairman Donald Kohn said such a proposal would insert politics into the Fed’s role in overseeing monetary policy and introduce uncertainty into the market.
Kohn also weighed in on President Barack Obama’s plan to overhaul the regulatory framework that governs financial institutions. Kohn said he supported the idea of giving the Fed the power to monitor risk across the system and regulate institutions that grow “too big to fail.”
But Kohn suggested the Fed shouldn’t lose its ability to protect consumers. Obama’s proposal would hand that role to a new agency.
Related News
Regulators close Warren Bank in Michigan; 96th US bank closed this yearOctober 2nd, 2009 Regulators close Mich. bank; 96th failure in '09NEW YORK — Regulators have shut down Warren Bank in Warren, Mich., the 96th U.S.
Obama administration warns against quick end to $700 billion bank bailoutSeptember 24th, 2009 No sign that bailout will expire at year's endWASHINGTON — The nation's economic recovery has just begun and "we still have work to do," a senior Treasury official told Congress on Thursday, the strongest signal yet that the administration is prepared to extend its $700 billion bank bailout fund. Herbert Allison, the department's assistant secretary for financial stability, cited declining prices in commercial real estate that could continue to weigh down bank balance sheets as evidence there is a long way to go before a true recovery takes hold.
Summary Box: FDIC weighs steps, including loans from banks, to shore up insurance fundSeptember 22nd, 2009 Summary Box: FDIC weighs steps to shore up fundTHE PROBLEM: The fund to insure deposits has been depleted by bank failures since the financial crisis struck. THE OPTIONS: Regulators could borrow billions from healthy banks, levy an extra fee on the industry, borrow from Treasury or collect banks' insurance premiums early.
Treasury OKs 3 more firms for mortgage relief program; $3.4 billion to Hartford FinancialJune 30th, 2009 Treasury OKs 3 firms for mortgage relief programWASHINGTON — The Treasury Department said Tuesday that it has approved three more firms for its mortgage relief program. The new approvals brought the number of companies participating in the mortgage effort to 23 with the total amount authorized for all of the firms rising to $17.98 billion out of a maximum of $50 billion the government has said it could spend on this program.
Regulators shut down 2 banks in Ga, 2 in Calif and 1 in Minn; 45 bank failures this yearJune 27th, 2009 Regulators shut 5 banks; 45 failures this yearNEW YORK — Regulators on Friday shut down five small banks, boosting to 45 the number of failures this year of federally insured banks. More are expected to succumb in the prolonged recession.
Regulators shut down 2 banks in Ga, 1 in Minn and 1 in Calif; 44 bank failures this yearJune 27th, 2009 Regulators shut 4 banks; 44 failures this yearNEW YORK — Regulators on Friday shut down four small banks, boosting to 44 the number of failures this year of federally insured banks. More are expected to succumb in the prolonged recession.
Regulators shut 2 small Georgia banks; 42 bank failures this yearJune 27th, 2009 Regulators shut 2 Ga. banks; 42 failures this yearWASHINGTON — Regulators on Friday shut down two small banks in Georgia, boosting to 42 the number of failures this year of federally insured banks.
List of 10 banks that got Treasury approval to pay back their bailout moneyJune 9th, 2009 List of 10 banks that will repay bailout moneyThe Treasury has given 10 banks permission pay back a total of $68 billion in government bailout money. The banks include the eight recipients of bailout money that passed regulators' stress test last month, plus the investment bank Morgan Stanley and Chicago-based custody bank Northern Trust Corp.
Iceland's central bank lowers interest rates by 2.5 percentage points to 13 percentMay 9th, 2009 Iceland cuts interest rates to 13 percentLONDON — Iceland's central bank has cut official interest rates by 2.5 percentage points to 13 percent to help the country's troubled economy. It is the third cut in rates this year by the central bank, called Sedlabanki.
Treasury says 12th bank has repaid support it received from $700 billion financial rescue fundMay 8th, 2009 Treasury says 12th bank has repaid bailout fundWASHINGTON — A Texas bank has become the 12th financial institution to return the money it received from the government's $700 billion bailout fund. The Treasury Department reported Thursday that Sterling Bancshares Inc.
Treasury says 11th bank has repaid support it received from $700 billion financial rescue fundMay 8th, 2009 Treasury says 11th bank has repaid bailout fundWASHINGTON — A Texas bank has become the 11th financial institution to return the money it received from the government's $700 billion bailout fund. The Treasury Department reported Thursday that Sterling Bancshares Inc.
Serbia's Central Bank challenges government-imposed wage cuts at Constitutional CourtMay 5th, 2009 Serbia's Central Bank challenges governmentBELGRADE, Serbia — Serbia's National Bank is challenging government-imposed salary slashing at the Constitutional Court. The bank says that the measures jeopardize the independence of the central bank which is guaranteed by the constitution.
Treasury provides $45.5 million to 7 new banks as part of $700 billion financial rescueMay 5th, 2009 Treasury provides $45.5M to 7 banks from bailoutWASHINGTON — The Treasury Department said Tuesday seven more banks have been approved to participate in the government's $700 billion rescue effort, and that a Colorado mortgage company was chosen to participate in a foreclosure mitigation program. The department said the government would purchase a total of $45.5 million in preferred stock in the seven banks, bringing the total supplied through the program to $198.02 billion for more than 500 banks.
Pandit, other top US bankers to defend use of bailout fundsFebruary 10th, 2009 WASHINGTON - Vikram Pandit, Indian American chief executive of CitiBank, and the heads of seven other major American banks will defend the use of hundreds of billions of dollars in bailout money to lawmakers on Capitol Hill Wednesday. 'American people are right to expect that we use funds responsibly, quickly and transparently to help American families, businesses and communities,' Pandit is expected to say before the House Financial Services committee, according to prepared remarks.
US Senate approves release of $350 bn of bailout packageJanuary 15th, 2009 WASHINGTON - The US Senate Thursday approved to release the remaining $350 billion of the $700 billion financial bailout package, clearing the way for a new infusion of cash for the financial industry. The request was approved by a vote of 52-42 after former Treasury secretary Larry Summers, who will be Obama's top economic adviser, promised that up to $100 billion of the remaining funds would be spent on tackling the US home mortgage crisis.
Loading ...