Taxpayers, don’t put away your wallets yet. Despite criticism from lawmakers, an unidentified Bloomberg source has said that a notice from Treasury Secretary Timothy Geithner should arrive in Congress sometime this week that extends the Troubled Asset Relief Program (TARP) until next October.
A Brief History of TARP
Passed in October of 2008, TARP was originally slated to run only until the end of this year. Recently, the US Treasury reported that TARP would cost $200 billion less than estimated, due to loans being repaid at a higher rate than expected. So far banks have payed back $71 billion of the distributed funds, with Bank of America® potentially bringing that figure up to $116 billion.
However, despite continued criticism on the effectiveness of the program, the Obama Administration has supported the extension on the grounds that despite the fact that bailouts for the major financial institutions are complete, it could still be useful in aiding small businesses and homeowners.
“There has rarely been a less loved or more necessary emergency program than TARP,” said President Obama in a speech yesterday in Washington, DC.
Opposition to TARP Extension
The plan to extend the program has received criticism from lawmakers who have been dealing with complaint from their constituencies that voters will no longer tolerate taxpayer financed bailouts, especially in light of the controversial executive bonuses that some of this money has been used for. This can be an important factor if TARP ends up being extended, especially as congressional elections are coming up next year.
Banks are also opposed to TARP, mostly due to the restrictions that come along with acceptance of the bailout funds. One of the major restrictions banks have experienced problems with are the salary caps imposed by pay czar Kenneth Feinberg. Bank of America®, which is searching for a new CEO, has found it difficult to attract the kind of talent they require under the TARP pay restrictions, and this may have been a contributing factor to their decision to pay back their TARP loans.