House lawmakers discourage extension of bank bailout
In letter to Treasury chief, members pan program for poor oversight and use of funds outside their original purpose.
Twenty-eight House lawmakers wrote Thursday to Treasury Secretary Timothy Geithner requesting that he not extend the Troubled Asset Relief Program that is slated to expire at year's end amid indications that the Obama administration will renew it for 10 months.
Twenty-one Democrats and seven Republicans wrote to Geithner that the program should end on Dec. 31, citing several reasons, including poor oversight, funds that were allocated outside their original purpose of bringing more liquidity to credit markets and a belief that no more taxpayer money should be used to prop up banks.
"It is essential that our economy continue to rebound, but the TARP program has been flawed from the start and further spending in this program to bail out banks on the backs of working families across the country is not the best way to help our economy, or a good use of taxpayer dollars. Our financial markets must be stabilized and rebuilt while protecting American taxpayers," the members wrote. Rep. Paul Hodes, D-N.H., organized the letter.
The Obama administration faces a political quandary in renewing the program, given bailout fatigue in Congress -- especially actions the Federal Reserve has taken without any legislative approval, such as its $182 billion rescue of insurance conglomerate American International Group.
But Geithner has indicated that the administration might renew the program through Oct. 3, 2010, to ensure financial markets do not backslide.
"I think the classic mistake people make is they declare victory too soon; they put on the brakes too early; they withdraw these things and then the system has to go back and build more insurance against the risk of a bad outcome, and that could intensify the recession or reignite [it]," Geithner told the TARP Congressional Oversight Panel on Sept. 10.
The Obama administration points out that only $365 billion in TARP funds have been allocated and that more than $70 billion has been repaid. "We have been cautious about spending TARP funds so that we to get maximum impact for every taxpayer dollar invested," said Meg Reilly, Treasury spokeswoman.
At a Senate Banking Committee hearing Thursday, Herbert Allison, Treasury's assistant secretary for financial stabilization, told the panel that "it would be premature" for him to discuss what the administration may recommend as far as extension. Senators were not amused. "Your testimony has been a little bit amorphous," Sen. Judd Gregg, R-N.H., told Allison.
"We need to get some answers," agreed Banking Committee Chairman Christopher Dodd, D-Conn.
Dale Eisman contributed to this report.