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Politics : The Obama - Clinton Disaster -- Ignore unavailable to you. Want to Upgrade?

To: longnshort who wrote (23163)	12/7/2009 10:32:58 AM
From: DuckTapeSunroof	1 Recommendation Read Replies (2) \| Respond to of 103300

U.S. Treasury Says TARP to Cost $200 Billion Less (Update1) By Rebecca Christie bloomberg.com Dec. 7 (Bloomberg) -- The Obama administration expects the cost of the Troubled Asset Relief Program to be $200 billion less than projected, helping to reduce the size of the budget deficit, a Treasury Department official said yesterday. The administration forecast in August that the TARP would ultimately cost $341 billion, once banks had repaid the government for capital injections and other investments. Congress authorized $700 billion for the program in October 2008. Banks have paid back $71 billion so far, and a planned repayment by Bank of America Corp. would bring that figure to $116 billion. Treasury Secretary Timothy Geithner said in an interview last week that he expects the TARP to get as much as $175 billion in repayments from banks by the end of 2010. “The fact that they are spending less TARP money means that recovery is better and stronger than expected, and that’s all positive for growth,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Calyon, the investment banking unit of France’s Credit Agricole SA. “It shows that things are progressing in the right direction.” The financial bailout program, begun under President George W. Bush, has drawn fire from critics in Congress who say the government has done more to help Wall Street banks than average Americans. Last month Republican Representative Kevin Brady of Texas told Geithner he should resign during a hearing of the Congress’ Joint Economic Committee. Create Jobs House Speaker Nancy Pelosi, a California Democrat, said last week that legislation is being written to use some TARP funds to help local communities and small businesses. Pelosi said TARP funds would be “appropriately used” to pay for new jobs promotion programs because “the more jobs we create the more money comes back into the public till” as tax revenue that will “reduce the deficit.” House Republican Leader John Boehner said Geithner should shut down the financial bailout program and use money left in the fund to reduce government debt. The U.S. budget deficit reached a record $1.42 trillion in the 2009 fiscal year that ended Sept. 30 as the government spent money on stimulus programs to pull the nation out of the worst recession since the 1930s and tax revenue declined. “The deficit is definitely a concern that’s overhanging the dollar, there’s no doubt,” said Calyon’s Kotecha. “But there is a long way to go before the deficit improves to a point where concerns completely recede. On the margin, it’s good news for the dollar but I don’t think we will see a huge impact off this news.” Turning a Profit The yield on the benchmark 10-year Treasury note was little changed at 3.47 percent as of 7:50 a.m. in London, according to BGCantor Market Data. The trade-weighted Dollar Index fell 0.4 percent to 75.604 as of 7:55 a.m. in London from 75.911 in New York late last week. The index tracks the U.S. currency against the euro, yen, U.K. pound, Canadian dollar, Swiss franc and Swedish krona. The Treasury invested about $245 billion last fiscal year into U.S. banks to shore up the financial system. In the long run, those investments are expected to turn a profit of $19 billion, compared with a previous estimate of a $76 billion cost, the Treasury official said yesterday. The government’s net cost for its investments in banks, auto companies and insurers came to $42 billion last fiscal year, the official said, about $110 billion less than projected in August. ‘Not Good Enough’ The Treasury official said the TARP should be judged on the basis of its effects on the financial system, and not its cost. The U.S. economy expanded for the first time in a year in the third quarter, growing at a 2.8 percent annual rate. The Standard and Poor’s 500 Financials Index has jumped 140 percent since March 6, and the cost of three-month dollar loans in London between banks fell to 0.257 percent on Dec. 4 from 1.41 percent at the beginning of the year. Employers cut 7.2 million jobs since the recession began in December 2007. Payrolls fell by 11,000 workers in November, the smallest decline in 23 months, figures from the Labor Department showed last week. The jobless rate declined to 10 percent, from a 26-year high of 10.2 percent in October. Geithner, in last week’s interview, said the decline in job losses was “progress, but not good enough.” As banks repay their TARP funds, the Treasury is disposing of the stakes it acquired through the program. To exit TARP, and the additional oversight it brings, banks must buy back the government’s preferred shares and also agree on how to dispose of warrants the Treasury received as part of the deals. Goldman Sachs Group Inc. redeemed its warrants for $1.1 billion, while JPMorgan Chase & Co., Capital One Financial Corp. and TCF Financial Corp. have opted to let the Treasury auction their warrants. That process is now under way. To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net; Last Updated: December 7, 2009 03:00 EST