Bush Administration turns the TARP over to Obama
In a surprising move, the Bush Administration has decided not to seek the $350 billion still to be used under the TARP (Troubled Asset Relief Program). Instead, they will allow Barack Obama’s Administration to distribute the monies as they see fit.
This is a good gesture on the part of the Bush Administration and should do some good in removing a growing sense that the funds were not being used appropriately. It remains unclear whether George Bush or Henry Paulson was responsible for this honorable gesture of good faith, but it appears it was George Bush overriding the desires of his Treasury Secretary.
From Bloomberg News:
The Bush administration told congressional aides it won’t ask lawmakers to release $350 billion remaining as part of the $700 billion U.S. financial- rescue package, people familiar with the matter said.
The administration of President George W. Bush ends in less than 10 weeks, and a delay in requesting the cash would leave it to President-elect Barack Obama to tap remaining cash in the bailout money.
The Treasury Department has committed $290 billion, or about 83 percent of the total allocated so far in a program Congress enacted last month to inject capital into a wide spectrum of banks and American International Group Inc. The U.S. invested $125 billion in nine major banks, including Citigroup Inc. and Wells Fargo & Co. and plans to buy an additional $125 billion in preferred shares of smaller lenders.
Treasury Secretary Henry Paulson has been criticized by lawmakers for shifting the focus of the program to inject capital directly into financial institutions. His initial proposal presented to Congress called for buying troubled assets from the firms.
The Treasury Department informed Congress that there would no notification this week, and didn’t go beyond that, a department spokesman said today. The secretary has no timeline for accessing the second $350 billion, the spokesman said.
Paulson and Federal Reserve Chairman Ben S. Bernanke will meet today with House Speaker Nancy Pelosi and other Democratic leaders to discuss how the funds are being used and a proposal to rescue the auto industry.
Paulson last week repeatedly declined to answer when and whether he would go to Capitol Hill for the rest of the funding.
“Right now, I have no timeline for drawing down the next $350 billion,” he said in a Nov. 13 interview with Bloomberg Television. The legislation setting up the program gives Congress the ability to block the final installment.
The shift in using the funds came under fire last week from legislators in a committee hearing with Neel Kashkari, Treasury’s interim head of the TARP program.
“This looks like classic bait-and-switch,” said Representative Dennis Kucinich, an Ohio Democrat.
Paulson and Bernanke are scheduled to testify tomorrow on the program before the House Financial Services Committee.