Back on Capitol Hill Thursday for his second hearing in two days, Treasury Secretary Tim Geithner continued to defend his department's plan to take taxpayer money repaid to the government by bailed-out banks and then use it to help struggling community banks.
On Wednesday, Senate Banking Committee Republicans like Jim DeMint, R-S.C., had expressed concerns that Geithner might use the $700 billion Troubled Asset Relief Program "permanently." The ranking Republican on the House Appropriations Subcommittee on Financial Services echoed those worries on Thursday.
"Is the TARP going to go on forever?" asked Rep. Jo Ann Emerson, R-Mo., wondering if the recycling of TARP funds could eventually lead to the nationalization of banks.
"I believe the secretary of the Treasury has the ability under the law to extend it beyond its initial expiration for an additional nine months, but I don't have the authority to extend it beyond that," Geithner replied. "It is not a permanent program. So we could not permanently recycle these programs and it is not our objective and I would never support a program designed to, as you question, a program designed to allow us to nationalize banks or other business, as a matter of policy, would never support that."
The Treasury chief stated Wednesday that they read the TARP law to mean that "a dollar that comes back to us goes in the general fund, but that does create additional room to make another dollar of commitments."
However, Sen. David Vitter, R-La., argued that the real reason for re-using the funds is that the administration does not want to come back to Congress to ask for more money.
While Geithner reiterated Thursday that Treasury would recycle TARP money to help community banks, he said these funds could not be used to help cities and states struggling to overcome budget problems.
"We do not believe that TARP as currently designed and legislated provides a viable solution to this specific challenge," he stated.
"We are restricted to giving assistance to financial institutions," he noted. "The way TARP is designed, every dollar we guarantee is charged against the limited funds Congress authorized. And for those reasons and others, it does not appear to us to provide a viable way of responding to that challenge, and I think that's one reason why your colleagues in the House are considering legislation to address that problem."
Instead, said the Treasury chief, it will be up to the mayors and governors of struggling cities and states to "carry the primary burden."
Subcommittee lawmakers also voiced fears on Thursday that government bailout money might be used to help ailing automakers like General Motors ship jobs abroad. GM is currently in restructuring talks with the Treasury and the United Auto Workers union, which has complained about the possibility of GM slashing domestic car production and boosting imports from countries like China and Mexico.
Roared Rep. David Obey, D-Wisc., "I'm not interested in providing one damn dime to any company, like General Motors, who decides that as part of their reorientation operation they're going to be closing plants in this country and moving them to Mexico or any other foreign country."