Treasury Secretary Timothy Geithner told Congress that the Obama administration is extending the $700 billion financial-rescue program until next October, saying the U.S. must hold on to the money in case of new financial shocks, Business Week reported.
In a letter to congressional leaders, Geithner said the administration doesn't expect to deploy more than $550 billion of the funds. He said the Treasury may expand the Federal Reserve's Term Asset-Backed Securities Loan Facility, an effort to jumpstart securitization markets, as well as continue to use the Troubled Asset Relief Program to help struggling homeowners and small companies.
While the TARP expires on Dec. 31, Geithner can extend it by notifying Congress.
The TARP, passed in October 2008 to prevent a collapse of the financial system, has drawn criticism from Congressional opponents of taxpayer-funded bailouts of banks including Citigroup Inc. The Obama administration, preparing the ground for an extension, has emphasized that the program may also be used to aid homeowners and small companies.
“Too many families, homeowners and small businesses still face severe financial pressure,” Geithner said. “Although bank lending standards are starting to ease, many categories of bank lending continue to contract. This contraction has hit small businesses very hard because they rely heavily on such lending, and do not have the ability to substitute credit from securities.”
The extension could bode well for the National Automobile Dealers Association. It is currently working to get the Small Business Administration to expand its floor-planning program, which has received a low response from lenders.
In public comments about the program over the past several weeks, Geithner has cautioned that shutting it down too soon could hurt the economic recovery.
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