WASHINGTON - President Obama said yesterday that the massive federal bailout program for financial insititutions had turned out to be much less costly than expected and that there may be ways to redirect some of the money toward creating jobs.
Obama declined to say directly whether he would seek to redirect some of the repaid money from the $700 billion Troubled Asset Relief Program, known as TARP, to jobs programs. He did say he would address the topic in an economic speech today.
A Treasury official said the administration now believed the cost of the financial-rescue program would be about $42 billion, or nearly $200 billion below the $341 billion estimate it made in August.
The official, who spoke on condition of anonymity because the administration's new projection has not been released, said the new, lower estimate reflected faster repayments by big banks and less spending on some of the rescue programs as the financial sector recovered from its free fall more quickly than the administration originally expected.
About half of the $42 billion in losses is expected to occur from the support provided to troubled automakers General Motors Corp. and Chrysler L.L.C.; the other half will come from the rescue package put together for insurance giant American International Group.
The new figures were being made final in a report being prepared by the Government Accountability Office. That report is expected to be made public tomorrow.
The president said the key question was determining whether the bailout money could be put toward selective job creation that meets the original intent of the law. He cited as an example directing bailout money to help small businesses get the loans they need to expand their operations and hire new workers.
The president's comments came as Democratic leaders on Capitol Hill were looking to tap as much as $70 billion of bailout funds to pay for new spending on roads and bridges and to save the jobs of firefighters, teachers, and other public employees.
Republican leaders are voicing strong opposition to that idea, saying all the unused money should go toward reducing the federal deficit.
"TARP was never intended to be used as a revolving slush fund to pay for the majority's political, economic or social agenda," Rep. Jeb Hensarling (R., Texas) wrote in a letter yesterday to House Speaker Nancy Pelosi. "Any unused or repaid TARP funds should be returned to those who originally paid for it - the American taxpayers."
Congress passed the TARP program in October 2008 to support the nation's financial system - including banks, insurance companies, andlaw on Wall Street investment firms. The system at that point was near collapse because of growing defaults on mortgages by homeowners.
"TARP has turned out to be much cheaper than we had expected - although not cheap," Obama said.
He said some of the money could be devoted to deficit reduction.