Obama May Extend TARP Beyond Expiration Date

That’s the bottom line.  Matt Jaffe has the details:

The Obama administration has not yet made a final decision on whether to extend the $700 billion Troubled Asset Relief Program, a White House official told ABC News today. However, noted a government source familiar with the matter, the administration is considering extending the program beyond its December 31 expiration date.

Earlier today Treasury Secretary Tim Geithner told a Joint Economic Committee hearing that the administration wants to end the program “as soon as we can”.

“We are working to put the TARP out of its misery and no one will be happier than I am to see that program terminated and unwound,” Geithner said. “And I want to point out that we are working very aggressively to close down and terminate the programs that defined TARP at the beginning of the crisis.”

Geithner also said “substantial resources” remaining in TARP will be used to pay down the national debt – as was stipulated by the law creating the program.

Section 106(d) of the Emergency Economic Stabilization Act of 2008 reads, “Revenues of, and proceeds from the sale of troubled assets purchased under this Act, or from the sale, exercise, or surrender of warrants or senior debt instruments acquired under section 113 shall be paid into the general fund of the Treasury for reduction of the public debt.”

Also today Treasury announced that it will auction off stock warrants for JP Morgan Chase, Capital One, and TCF Financial that it received as part of TARP. Under the program Treasury received stock warrants from banks that took taxpayer money. When banks pay back the money, Treasury and the banks usually agree on a price for the banks to buy back the warrants. However, in these three cases the auctions will be used because Treasury and the banks were unable to agree on a deal. The auctions will be run by Deutsche Bank, Treasury said.

-Matthew Jaffe