Money Matters, Simplified.
TARP to fund jobs promotion program
by Jamie Anderson - December 7, 2009 - comments
TARP is due to expire at the end of this year, but the Treasury has indicated it will use the authority it was granted by Congress to extend it into 2010.
New York, December 7: Initiated under the regimen of President George W. Bush, the Troubled Asset Relief Program (TARP) is expected to cost close to $200 billion less than what was projected.
The reduction in the cost of TARP, which hitherto, has been widely criticized for bailing out the Wall Street banks, may well pave the way for the introduction of a similar program that may aim at generating more jobs.
Right direction
The Congress had sanctioned an amount of $700 billion for the program in October 2008. So far, banks have repaid $71 billion of the TARP funds. A proposed repayment by Bank of America Corp (BOA) will bring the total repaid amount to $116 billion.
If the words of Treasury Secretary Timothy Geithner are anything to go by, as much as $175 billion would have been repaid by the banks by the end of 2010.
The Treasury has garnered over $10 billion in interest and dividend payments from the 690 odd firms that it had bailed out with the help of TARP funds.
Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Calyon noted, “The fact that they are spending less TARP money means that recovery is better and stronger than expected, and that’s all positive for growth. It shows that things are progressing in the right direction.”
Jobs promotion program
The U.S. budget deficit had, as on Sept 30, 2009, touched a record high of $1.42 trillion. The deficit had burgeoned primarily due to the money that the government had spent on stimulus programs to pull the nation out of a quagmire.
“The deficit is definitely a concern that’s overhanging the dollar, there’s no doubt. But there is a long way to go before the deficit improves to a point where concerns completely recede. On the margin, it’s good news for the dollar but I don’t think we will see a huge impact off this news,” added Kotecha.
The government has been under enormous pressure to rein in the $1.42 trillion budget deficit. At the same, the White house has to tame the unemployment rate which has been hovering around the 10 percent mark.
President Barack Obama is likely to raise the proposal of utilizing the TARP funds for a jobs bill.
House Speaker Nancy Pelosi, a California Democrat said that the TARP funds would be “appropriately used” for a new jobs program as “the more jobs we create the more money comes back into the public till” as tax revenue that will “reduce the deficit.”