The administration of US President Barack Obama planned to announce yesterday that it intends to extend the life of the US$700 billion financial bailout fund until October, administration officials said on Tuesday.
One official said the administration was expected to pledge to use no more than US$560 billion from the fund. Another said the plan would be to tap the program to help homeowners secure mortgages through the government’s housing program and to free up credit for small businesses to spur job growth.
Both requested anonymity.
The financial rescue program, which has been used to pump money into banks, insurer American International Group and troubled automakers, was approved by Congress in October last year at the height of the credit crisis.
It would expire on Dec. 31 absent a decision to extend it.
The law that established the fund, known as the Troubled Asset Relief Program (TARP), gives the administration the discretion to decide whether it should be extended, but it limits any extension to October.
US Treasury Secretary Timothy Geithner told Congress last week that much of the US$700 billion lawmakers had authorized to salvage the banking system would not be needed, but that it would be a mistake to shut down the program.
“If you look at the US financial system today, there are parts that are still very damaged,” he said, citing the housing sector and problems small businesses are having in accessing credit.
Opposition Republicans have accused the administration of wanting to use the bailout program as a job-creating “slush fund.”
“There has rarely been a less loved or more necessary emergency program than TARP, which as galling as the assistance to banks may have been, indisputably helped prevent a collapse of the entire financial system,” Obama said on Tuesday.
Soaring unemployment threatens to eat into the majority the Democrats hold in Congress when voters go to the polls in November.
To reduce the nation’s 10 percent jobless rate, Obama proposed small business tax cuts and energy efficiency rebates, among other steps. This comes on top of a plan outline to provide capital to community banks that lend to small businesses.
Obama was set to meet Democratic and Republican leaders of Congress at the White House yesterday to promote his jobs proposals.
At the end of last month, US$560 billion had been allocated from the TARP program, the same amount the administration is now expected to declare as a cap.
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