Obama extends bailout programme
The Obama administration has extended the $700bn (€475.3bn) bailout programme until October, setting the scene for a Congress battle.
Democrats who favour using some of the leftover money to help generate jobs will clash with their Republican opponents who say it should be used to shrink soaring budget deficits.
The administration insists the bailout fund is still needed to prevent further turmoil in the banking system.
In announcing the decision, US treasury secretary Timothy Geithner said extending the programme would also help homeowners struggling to avoid repossessions and small businesses having trouble getting loans.
Yesterday's decision came on the same day the administration acknowledged two key bailout programmes lost a total of $60.7bn (€41.2bn).
The bailout of insurance giant American International Group and the lifeline thrown to struggling car makers each cost more than $29.9bn (€20.3bn), according to treasury data disclosed in a report from the Government Accountability Office.
The administration is now projecting the losses to the government from the bailout programme will be around $140.6bn (€95.45bn) - $200bn (€135.8bn) less than it estimated two months ago.
President Barack Obama said the freed-up money could help reduce the record-high government budget deficit and "invest in job creation on Main Street rather than Wall Street".
Mr Obama spoke after a meeting with congressional leaders aimed at providing momentum for a new jobs programme he outlined on Tuesday.
That effort seeks to combat the nation's 10% unemployment rate by providing tax breaks to encourage companies to hire new workers, increase bank lending to small businesses and provide a fresh round of infrastructure spending.
The administration has not provided details on the size of the new spending package, but Democratic leaders suggested it could cost between $60bn (€40.7bn) and $150bn (€101.84bn).
Democrats initially hoped to pass Mr Obama's proposals this month, but they will probably slip until early January, given opposition from Republicans and the to-do list already facing Congress as it struggles to finish business before Christmas.
Both the administration and Democratic leaders have indicated they want to divert some of the unspent bailout funds to a jobs programme.
Their goal is to refashion a hugely unpopular programme viewed by voters as a taxpayer-funded bailout for big Wall Street firms that then paid out millions of dollars in lavish bonuses.
Republicans vowed to keep trying to close down the rescue programme by the end of this month. They said any leftover funds should be devoted exclusively to curbing the country's soaring budget deficits.
"The Obama administration just can't seem to let go of the $700bn (€475.3bn) in 'walking around money' taxpayers were forced to put on the line to bail out Wall Street last year," said Rep Jeb Hensarling.
Republicans also criticised the treasury for using the Troubled Asset Relief Programme as a slush fund to support programmes that Congress never intended - including bailouts of car makers and AIG.
"American taxpayers have had enough of open-ended bailouts that have left them stuck with trillions of dollars in new debt," House Republican leader John Boehner said.
"TARP should be shut down by the end of the year. It's time to get the government out of the bailout business."
But Mr Geithner argued that the bailout programme helped avert a worse financial outcome. Financial conditions have improved, and the economy has finally pulled out of a deep tailspin and is starting to grow again.
Repayments from banks which received TARP support will soon total $115.45bn (€78.3bn), including $45bn (€30.5bn) from Bank of America.
The government expected up to $174bn (€118.2bn) in repayments from rescued companies by the end of next year, Mr Geithner said.
The news follows two audits yesterday that criticised the government's handling of the bailout programmes.
The first was from an independent panel that oversees the TARP. The panel found that the programme had succeeded in averting a much worse financial crisis, but said there had been little progress on other goals set out by Congress.
Separately, the GAO audit disclosed the treasury's accounting for the TARP for the fiscal year that ended on September 30.
It said the programme lost $60.66bn (€41.2bn) on programmes to rescue AIG and car makers General Motors and Chrysler, but that loss was partially offset by $19.5bn (€13.2bn) in profits on bank bailouts.
The GAO identified two "significant weaknesses" in the treasury's accounting for bailout funds. It said the treasury did not have a good process for preparing financial disclosures and did not adequately check numbers used to estimate the values of its investments in banks.
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