By Ian Swanson - 12/09/09 03:03 PM EST
Treasury Secretary Tim Geithner made the announcement in a Wednesday letter to Speaker Nancy Pelosi (D-Calif.) that also outlined his department’s plans to unwind the Troubled Asset Relief Program (TARP).
Geithner said the extension was necessary to stabilize financial markets, which have improved markedly since the federal government used the TARP to invest in hundreds of banks.
Geithner also emphasized that the TARP has cost far less than expected, meaning funds could be used to help the economy and drive down the deficit.
“The combination of the reduced scale of TARP commitments and substantial repayments should allow us to commit significant resources to pay down the federal debt over time and slow its growth rate,” Geithner said in his letter.
Geithner said Treasury expects to spend no more than $550 billion of the funds, and that it expects to have $175 billion returned to it by the end of next year. Treasury also expects significant repayments after the end of next year.
President Barack ObamaBarack ObamaPoll: Obama nets positive reviews for third month 10 human rights goals for the president's 'fourth quarter' White House on Obama drinking Flint water: 'The man was just thirsty' MORE on Tuesday threw his support behind using some TARP funds to pay for a new jobs bill designed to help small businesses, and Geithner said the improvements in the TARP’s performance put the government in a better position to address the economic and financial challenges faced by the country.
Geithner concluded his note by warning that exiting prematurely from the TARP could extend the economic downturn.
“We must no waver in our resolve to ensure the stability of the financial system and to support the nascent recovery that the administration and the Congress have worked so hard to achieve,” he said.