What Could TARP Payback Buy? Try 123,000 Homes

June 3, 2009— -- Could the billions of dollars that banks are slated to pay back to the government eventually help you save your homes or borrow for your small businesses?

The Federal Reserve is scheduled to announce next week which of the country's biggest banks will be cleared to repay the funds they received through the government's Troubled Assets Relief Program. At least five big banks have applied to return the funds, according to Reuters: JPMorgan, Goldman Sachs, Morgan Stanley, American Express and Bank of New York Mellon, which received a total of more than $51 billion from the government.

The Treasury Department has said that repaid funds from the big banks would be used by the government to invest more money in the nation's smaller banks -- those with less than $500 million in assets -- which could then use the funds to increase lending to consumers and businesses.

What could the small banks do with $51 billion? That remains to be seen but, to put it in perspective, $51 billion is enough to:

While it's uncertain exactly how each bank will spend the funds, Treasury Secretary Timothy Geithner has made clear what the money should not be used for: bailing out cities and states with budget shortfalls.

"We do not believe that TARP as currently designed and legislated provides a viable solution to this specific challenge," Geithner told a Senate committee last month.

The idea of recycling TARP funds has rankled some in Congress, including Sen. David Vitter, R-La., who last month sent a letter to Geithner noting that the law authorizing TARP specified that any money repaid to the government be used to reduce the public debt.

Vitter re-asserted his objections Tuesday to the use of repaid TARP funds for anything other than debt reduction.

"On the one hand, Treasury is paying down the debt and, on the other hand, they're increasing it," Vitter said in an e-mailed statement to ABC News. "The taxpayer benefits under this scenario for about 10 minutes before Treasury repurposes taxpayer money. And even though I didn't support the original TARP legislation, this is clearly not the intent of the law that many of my colleagues thought they were endorsing."

But Geithner has maintained that the Treasury is following the law.

The law gives the government the flexibility to provide "additional reinforcement to help improve credit markets, help address the housing crisis [and] help get lending to small business flowing again," he said in an interview with CNBC Tuesday. "We'll use that, because, again, we want this economy to emerge as quickly as possible, [for] a stronger foundation for growth."

A Treasury Department spokeswoman did not return calls for comment Tuesday.