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Updated Friday, November 20, 2009 11:09 am TWN, By David Cho, Michael D. Shear and Lori Montgomery, The Washington Post

U.S. administration ready to prolong financial bailout

But many lawmakers have decried the massive initiative — proposed by the Bush administration and continued under Obama — for using tax dollars to aid banks that triggered the crisis in the first place. The public was especially infuriated by multi-million dollar bonuses paid out to executives of firms that got bailout funds.

As the financial crisis has abated, Treasury officials have tried to recast the initiative by winding down its programs for big banks and directing help to small businesses, community banks and struggling homeowners instead. Officials have even started calling the bailout by its alternative name, the Emergency Economic Stabilization Act.

Over the summer, Treasury officials considered using the unallocated funds to support troubled commercial real estate markets, but ultimately dismissed the idea. Since then, Geithner has supported using the leftover money to reduce the nation's debt, the sources said.

White House and Treasury officials have been meeting regularly to discuss how best to handle the extension of the bailout, officials said. The president's political and economic advisers agree with their counterparts at Treasury that the program must be extended so that initiatives for small business, community banks and housing can continue and to reassure financial markets that the administration has enough money on hand to address another, unforeseen financial crisis.

White House aides said they are continuing to discuss how to structure the extension and when to announce it. A decision must be made by Dec. 31. Administration officials are mindful that this potentially unpopular move will come as President Obama is engaged in other politically charged matters, including the Congressional debate over healthcare reform and the development of a new U.S. strategy for the Afghanistan war.

Discussions are also continuing between the White House and Treasury this week about how to divide up the unused TARP funds between debt reduction and the smaller bailout programs.

In announcing the bailout extension, officials could set aside the majority of this money for small business programs as a nod toward the administration's focus on spurring job growth, the sources said. On the other hand, the White House is under pressure to show they are serious about reducing the nation's deficit, which has ballooned as the result of government spending to address the economic crisis, and this could prompt officials to channel the majority of funds to debt relief.

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