Treasury Department Extending TARP to October 2010

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Treasury Secretary Timothy Geithner, in a letter to Congressional leadership, said the administration plans to extend the Troubled Asset Relief Program (TARP) to Oct. 3, 2010, in order to continue to implement programs to address housing markets and small business needs, and to be able to respond to unforeseen threats.

“The recovery of our financial system remains incomplete…near-term shocks to that system could undermine the economic recovery we have seen to date,” the secretary wrote.

Geithner said the administration does not expect to deploy more than $550 billion of TARP funds, and anticipates up to $175 billion in repayments by the end of next year, and substantial additional repayments thereafter. As a result of the reduced scale of TARP commitments and substantial repayments, Geithner noted that the government should be able to commit significant resources to pay down the federal debt.

The letter stated that the government expects a positive return from the government’s investment in banks, which soon will have repaid nearly half of the TARP funds they received. The administration also expects to recover all but $42 billion of the $364 billion in TARP funds disbursed in fiscal year 2009. TARP is expected to cost taxpayers at least $200 billion less than was earlier projected, Geithner stated.

New commitments in 2010 will be limited to three areas, Geithner said—mitigating foreclosures, facilitating small business lending, and an increased commitment to the Term Asset-Backed Securities Loan Facility.