Obama Administration Extending TARP Until 2010

Dec. 9, 2009— -- As ABC News first reported Tuesday evening, the Obama administration today announced it is extending the controversial Troubled Asset Relief Program, or TARP, until October 2010, to free up credit for small businesses to expand and for homeowners to secure their mortgages through the Obama administration housing program.

TARP became law in October 2008 and was set to expire Dec. 31, 2009.

The secretary of the Treasury has the power to extend the program if he sees fit, though he has to notify Congress. On Wednesday morning Tim Geithner did just that.

In a letter to House Speaker Nancy Pelosi, Geithner said the extension to Oct. 3, 2010 was "necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses and to maintain the capacity to respond to unforeseen threats."

The Treasury chief also stated that the administration may increase its commitment to a program -- known as the Term Asset-Backed Securities Loan Facility (TALF) -- aimed at boosting lending to small businesses and consumers.

"The recovery of our financial system remains incomplete," Geithner warned. "And near-term shocks to that system could undermine the economic recovery we have seen to date."

"While we are extending the $700 billion program, we do not expect to deploy more than $550 billion," he noted. "We also expect up to $175 billion in repayments by the end of next year and substantial additional repayments thereafter. The combination of the reduced scale of TARP commitments and substantial repayments should allow us to commit significant resources to pay down the federal debt over time and slow its growth rate."

The nation's budget deficit soared to a record $1.4 trillion in fiscal year 2009 due to the government's efforts to save the financial system and rescue the country from recession.

But the ultimate cost of the program is now expected to be no more than $140 billion.