This morning, Treasury Secretary Timothy Geithner announced that he would be extending the Troubled Asset Relief Program – or TARP – by 10 months. Geithner went on to say that the new, scaled back program would be focused on getting loans to small businesses, stopping foreclosures, and stimulating loans from the credit market. The extended TARP is estimated to cost no over $500 billion.
"History suggests that exiting prematurely from policies designed to contain a financial crisis can significantly prolong an economic downturn," Geithner wrote in a letter to congressional leaders. "We must not 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."
Under the TARP law, the bailout program would have expired at the end of December if Geithner had not decided to extend it.
Geithner said that in the end he does not expect to spend more than $550 billion and that $175 billion will be repaid by the end of 2010.
His letter also includes a current accounting of TARP: The government expects to lose $42 billion of the $364 billion it disbursed in the 2009 fiscal year, which ended on Sept. 30.
While most observers had expected Geithner to extend the bailout, Republicans have been calling for it to be shut down and have filed legislation to end it.