Risking a storm of criticism, President Obama is proposing the “selective” deployment of funds intended for bank bailouts to new initiatives for job creation.
To sweeten the deal and mollify his detractors, Obama also will call for using some of the $200 billion in Troubled Asset Relief Program funds for paying down the $1.4 trillion federal deficit.
“TARP has turned out to be much cheaper than we had expected, although not cheap,” Obama said at the White House.
The president, who vowed over the weekend to redouble his efforts on job creation, will speak on the economy at the Brookings Institution, outlining his plans.
The president is considering using the money on a mix of options developed in large part by his private-sector advisers. They include a so-called “cash for caulkers” incentive program for weatherizing public and private buildings, spending on infrastructure like roads and direct aid to local governments and small businesses.
Republicans, however, are challenging the administration’s notions for treating the excess TARP funds like found money, saying the law that created the TARP demands the cash go back to the treasury.
“TARP funds borrowed from the taxpayer should not become a slush fund for the political whims of Washington,” said House Republican Whip Eric Cantor of Virginia. “This country is in debt, and the only responsible action is to pay it down, not preserve and expand it.”
Congress created the $700 billion TARP in the waning days of former President George W. Bush’s administration. The program was a crisis-driven effort to stabilize the financial sector, and it later paid for a bailout of automakers.
But the program was awash in scandal nearly since its inception, as some banks and other institutions receiving the taxpayer money were exposed for doling out lavish executive bonuses and failing to provide loans and other services. Some now say they can’t pay back the government.
Obama faces a year-end deadline to cancel the program or continue it. Administration officials have been grappling with the best way to politically justify new ways to spend the money.
White House press secretary Robert Gibbs previewed the administration’s sales pitch, saying, “What message does that send to Main Street? Help is on the way.”
In what has become a feature of his problem solving, the president is looking to tread a middle path between using the TARP money in a way that would help him politically — by showing action on jobs — and throwing a bone to critics more inclined toward deficit reduction.
“The question is, are there selective approaches that are consistent with the original goals of TARP — for example, making sure that small businesses are still getting lending — that would be appropriate in accelerating job growth?” Obama said.
The administration initially projected that TARP would add $341 billion to the deficit, but more recently adjusted that forecast down by $200 billion, saying repayment of much of the funds was speedier than expected, and in some cases included interest.
