U.S. administration ready to prolong financial bailout

Administration officials are grappling with how best to announce the extension of the Troubled Assets Relief Program at a time when the economy is struggling and the unemployment rate is at its highest point in 26 years. The officials are hoping that by putting US$200 billion toward paying down the US$12 trillion debt, they could mitigate the political fallout, the sources said.

No final decision about the fate of the bailout has been made and officials are keenly aware that their preferred course contains risks. Officials worry that lawmakers, seeking to fund their own projects, may try to tap any large sum of unused money set aside for debt reduction, the source said, speaking on condition of anonymity because the internal deliberations were private.

Congressional Democrats are already eyeing the unexpended bailout cash as a source of funding for new efforts to combat soaring unemployment. Rep. John Larson, D-Conn., chairman of the House Democratic Caucus, said lawmakers could an important message about their priorities by taking money from the financial bailout program and redirecting it to pay for road and bridge projects and other measures meant to create jobs.

“We want to look at how Wall Street can refund Main Street,” Larson said He added that he and a number of other senior House Democrats are also considering a new tax on financial transactions.

Meanwhile, some lawmakers warn that the administration must do even more to cut the deficit. Sen. John Thune, R-S.D., introduced a bill this week that would end the bailout program. He said he was aiming keep it from turning into what he called “a political slush fund.”

About US$139 billion in original TARP funds remain unallocated and available to the Treasury Department. Banks have meantime returned about US$71 billion the government gave them and paid another US$10 billion in interest and dividends to the Treasury. Under the law passed last year, Treasury Secretary Timothy Geithner need only notify Congress if he wants to extend the program until October, the two-year anniversary of the bailout bill.

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