Obama administration looks to use TARP for deficit reduction

The Obama administration may begin using leftover bailout funds to pay off the deficit, the president's budget director said Thursday.

Office of Management and Budget Director Peter Orszag told a summit this afternoon sponsored by Bloomberg News that the $210 billion in unspent funds from the Troubled Asset Relief Program (TARP) may be used in part to pay off the deficit.

"We're reorienting TARP towards assistance for responsible families and lending for small businesses," Orszag said. "And the question that arises as part of that is whether, while maintaining flexibility to deal with future financial crises, one can also free up some resources for debt reduction."

Federal law mandates that leftover funds and profits from the program be used to pay off the deficit, but Orszag's remarks may mark one of the first signs that the administration may be finished using TARP funds toward assisting the ailing U.S. financial system.

Lawmakers have pushed the administration to use the remaining funds in a variety of ways, including a second, jobs-oriented stimulus, more support for small and local banking, or paying off the deficit.

Treasury Secretary Tim Geithner told CNBC Thursday morning that the administration would begin to examine how to bridge the deficit more aggressively once the U.S. recession had begun to subside.

"As growth recovers and as the temporary support for the economy we had to put in place to solve the crisis, as that winds down then we'll be able to start to put our fiscal position on a path to a more sustainable position," Geithner said. "That's important for the United States, important for global financial stability."

The administration is seen as likely to want to keep some parts of the TARP program intact as a backstop against future shocks to the financial system.