Treasury Can't Say How Much Taxpayers Will Have to Pay for New Financial Industry Bailout
February 10, 2009 - 7:38 PMNewly confirmed Treasury Secretary Timothy Geithner announced a plan Tuesday to inject up to $2 trillion into the nation's wounded financial system, but he would not – or could not -- say how much of the new program ultimately will be charged to taxpayers.
The new initiatives would replace former Treasury Secretary Henry Paulson’s Troubled Assets Relief Program, or TARP, with a new Capital Assistance Program. It also would replace or expand the veritable alphabet soup of other programs established under the Bush administration.
The goal is to carry on the central mission of restoring stability to the nation’s financial system, Geithner said.
The only pledge Geithner made was that the programs would continue as long as they were needed.“We believe that action must be sustained until recovery is firmly established,” Geithner said.
The newly confirmed secretary hinted that another installment of tax dollars may be needed to finance this new program, since $350 billion of the original $700 billion from the first bailout already has been spent.
Geithner, meanwhile, promised to spend the remaining $350 billion “better” than Paulson, his predecessor, did.
“This program will require a substantial and sustained commitment of public resources,” Geithner explained. “Congress has already authorized substantial resources for this effort, and we will use those resources as carefully and effectively as possible.”
He added: “We will consult with Congress as we move forward, and work together to make sure we have the resources and the authority to make this program work.”
Geithner did not take questions from the press following his statement, choosing instead to exit to applause from invited dignitaries and guests. The Treasury Department instead provided senior officials in a closed-door briefing.
According to those officials, the Treasury does not have a full accounting of the cost of the new programs.
The officials did reveal that $50 billion would be spent on an unspecified mortgage relief program; $100 billion will seed the expansion of the Bush administration’s Term Asset-Backed Securities Lending Facility (TALF), a joint Treasury-Federal Reserve program which focuses on credit-card debt, small-business loans, auto loans and student loans.
While much of the money for the new administration’s initiatives will come from the remaining $350 billion of original bailout money, two of the new programs threaten to require new funding.
The Capital Assistance Program, which is intended to function much like TARP, by providing capital to qualifying banks, will be joined by the Public-Private Investment Fund--a proposed joint venture between Treasury and unknown private investors to buy illiquid assets from troubled banks.
The senior Treasury officials admitted that they simply do not know the final cost of either of these two programs.
The officials also declined to answer questions about where the money will come from and if there are limits--or would be an end--to the government bailouts.
“Congress has allocated substantial resources to this program,” one senior official told CNSNews.com. “Over the course of the next several weeks and months we are going to put a lot of that money to work.
“As it becomes clear over time, if it looks like we’re going to need more capital, we will work with Congress. We’ll be very open about why we see the need for more capital, what we’ll do with it, and what the objectives would be. Right now we have resources that are sufficient to launch our program.”