Geithner Extends TARP Through October 2010

NPR reports Treasury Secretary is extending the TARP bailout program until October of 2010. In a letter congress, Treasury Secretary Tim Geithner said TARP is still needed to provide capital to small businesses and banks and to provide foreclosure relief to struggling homeowners.

Treasury Secretary Timothy Geithner announced Wednesday that the administration will extend the government’s financial bailout program until next fall. The decision came as a watchdog panel said ongoing problems in the financial system show the bailouts did not address all of Congress’ concerns.

In a letter to House and Senate leaders, Geithner said the extension is “necessary to assist American families and stabilize financial markets.”

Money from the $700 billion taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others. That’s angered many Americans, who feel the government hasn’t provided them with relief from high unemployment and rising home foreclosures.

Geithner said the Troubled Asset Relief Program that Congress passed in October 2008, will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.

“The recovery of our financial system remains incomplete,” Geithner told lawmakers. “And, near-term shocks to that system could undermine the economic recovery we have seen to do.”

Watchdog Sees Uneven Success

Separately, a watchdog panel said the government’s bailout of the financial system helped prevent an all-out panic last fall but hasn’t met many of the targets Congress set out.

“Congress set goals for (the bailouts) that went well beyond short-term financial stability, and by that measure problems remain,” said panel chair and Harvard Law school professor Elizabeth Warren.

The programs funded by the bailout — including bank capital injections, foreclosure relief and automaker rescues — were uneven in their success, the panel says. But it also noted that there is broad consensus that the programs helped avert a possible economic calamity.

The findings are part of a sweeping review of a year’s work by the panel Congress created to oversee the Troubled Asset Relief Program, or TARP. It discusses the relative strengths of the diverse programs funded by TARP and evaluates them against standards Congress set.

The Treasury Department said in a statement that “by every measure, TARP has succeeded in achieving its primary goal of economic stabilization.”

“Confidence in our financial system has improved, access to credit is increasing, and the economy is growing. The government is exiting from its emergency financial policies and taxpayers are being repaid,” Treasury said. “Indeed, the ultimate cost of those policies is likely to be significantly lower than previously expected.”

But the panel’s report points to ongoing problems in the financial system as evidence that the bailouts did not address every concern Congress laid out. Among the problems: Limited credit, ongoing bank failures, continued weakness at some large banks, escalating job losses and foreclosures and the banking system’s continued reliance on government support.

A New Focus On Foreclosures, Small Banks

Geithner said new commitments bankrolled by the bailout fund will be limited to three areas next year.

One focus is stepping up efforts to curb record-high home foreclosures, a move necessary to stabilize the housing market and support a lasting economic recovery.

Another will be providing capital to small banks, which play a crucial role in providing credit to small businesses – normally a leading engine of job creation. But small banks have been weighed down by problem commercial real estate loans, which has made them reluctant to lend and hurt the ability of small businesses to expand and hire.

In a third area, Geithner said the government may boost its commitment to a program aimed at sparking lending to consumers and small businesses. Run by Treasury and the Federal Reserve, the Term Asset-Backed Securities Loan Facility, or TALF, started in March.

Geithner said he didn’t expect any new commitments to the TALF would result in additional costs to taxpayers.

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