Wednesday, September 30, 2009

TARP Money

The effects of the government’s $700 billion bailout of the financial industry may last for years, even as lawmakers push to end the controversial program before 2010, The Hill reported. The debate over the program’s future comes a year after lawmakers were spurred into action to pass the bailout package, known officially as the Troubled Asset Relief Program (TARP). Some of the significant portions of the TARP program that may continue for years include:

• The Obama administration’s effort to support the housing market with incentives to firms that modify loans is still getting started. The program relies on $50 billion in money under the TARP program. The administration has set a goal for firms to modify 500,000 loans by Nov. 1, but the terms of the program show that modifications will continue for five years.

• More than 600 banks continue to rely on the capital purchase program that put equity into the firms. TARP provides incentives for banks to repay the money early, but the Obama administration’s latest budget documents predict a $10 billion debt in TARP equity accounts in 2016.

• The Term Asset-Backed Securities Loan Facility (TALF), a program run jointly by the Federal Reserve and Treasury to support credit markets, has already been extended into the first half of 2010. The TALF program relies in part on TARP money.

• The Fed and Treasury committed more than $180 billion to support the crippled insurance firm AIG. The company is attempting to restructure, but it has yet to repay roughly $45 billion of the TARP money. The Government Accountability Office (GAO) said that the company’s ability to repay is “unclear at this time."

Thirty-nine Republican senators and Sen. Mark Begich (D-Alaska) wrote to the Treasury Department to let the TARP program expire this year and use the repaid money to reduce the national debt. Meanwhile, Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) have sponsored legislation that would shift the government’s investments in a private company, if they exceed 20 percent of the firm, to an independent trust. The bill would apply to AIG, General Motors and Citigroup.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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