Democrats want homeowners and workers to get money from TARP


That conflicts with the Obama administration’s idea of dedicating some of the money toward reducing the deficit.

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The calls from Capitol Hill to change course on the controversial one-year-old bank bailout, officially known as the Troubled Asset Relief Program (TARP), come as voters hear Wall Street banks announcing record bonuses while the unemployment rate for October hit 10.2 percent — its highest level in decades.

More than $317 billion in money from the TARP had yet to be directed as of Sept. 30, according to the special inspector general for the program. Billions will be left over when the program ends, even if the Treasury Department extends the program beyond its Dec. 31 expiration date to October of next year, as it is expected to do.

More than half of the Democrats in the Senate want to use the remaining money to provide small businesses with easier access to credit. Rep. Barney Frank (D-Mass.) has proposed using $2 billion of it to give aid to homeowners facing foreclosures. Reps. Peter DeFazio (D-Ore.) and Earl Blumenauer (D-Ore.) have proposed using some of the money for infrastructure projects, which they say would lead to more jobs.

“There’s a lot of stuff swirling around right now, a whole of lot of ideas,” DeFazio said.

The White House last week signaled that it plans to get serious about both the jobless rate and the deficit, which hit a record $1.4 trillion in 2009.

President Barack Obama said he would convene a job-creation summit next month. The administration is also considering using bailout funds for deficit reduction and freezing or cutting spending in the 2011 budget from the previous year’s levels, The Wall Street Journal reported.

DeFazio dismissed suggestions that the deficit needs to be addressed before lawmakers tackle unemployment, which hit a 26-year high last month and is expected to rise.

“Main Street’s most immediate concern is not deficits; it’s the economy and jobs,” DeFazio said.

A pressing issue for Democrats on Capitol Hill is the midterm elections. Unemployment is considered the country’s top problem by one-fifth of Americans, according to a Gallup poll taken earlier this month. The federal budget deficit was deemed the top problem by 6 percent.

Other Democrats said they’re hopeful that the leftover TARP dollars can be used for both relief to struggling Americans and deficit reduction.

Frank noted that his plan for foreclosure aid would take just $2 billion in TARP funds to provide low-interest loans to help unemployed homeowners make mortgage payments.

Frank added that he believes the Obama administration will go along with some plans to use TARP money for relief.

When asked if the White House is too focused on deficits at a time of high unemployment, Frank said, “I hope not.”

A proposal championed by Sen. Mark Warner (D-Va.) would use TARP funds to start a new $50 billion fund to give loans to small businesses. Warner asked to start the fund in a letter to President Obama signed by 32 other Senate Democrats.

Warner, who backs a push by Senate centrists for a special bipartisan commission to find a way to reduce deficits, told The Hill he thought there would be enough TARP money left over for both small-business aid and deficit reduction.

Warner said that a $50 billion loan fund would be “enormous” help for struggling small businesses.

Sen. Mark Begich (D-Alaska) said he is working with Warner to provide more small-business help because banks have yet to make enough money available to those businesses.

“It’s what TARP in theory should have done,” Begich said.

Republicans have sought to end TARP at the end of the year. Sen. John Thune (R-S.D.) is pushing a bill blocking Treasury Secretary Timothy Geithner from prolonging the bailout program.

Thune told The Hill that the Democratic proposals to use money for unemployment and homeowner aid are “way far afield” from its initial purpose of rescuing banks saddled with assets that went bad during last year’s financial crisis.

“$700 billion is a lot of money, and I think the American people want to see that the TARP fund doesn’t become this political slush fund, which many people already think it is,” Thune said.

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Treasury Department spokesman Andrew Williams said that the administration shares Thune’s goal of “restoring financial stability at the lowest possible cost to taxpayers and dedicating uninvested TARP money to reducing the debt.”

But the administration argued that ending TARP too soon would undermine the economy’s recovery.

“[T]he U.S. economy has just begun to grow again, and far too many Americans are unemployed, so we should be careful about limiting government’s ability to respond to the crisis while recovery remains fragile,” Williams said in a statement.

Silla Brush contributed to this article.