Government looks to TARP for debt help

John Dimsdale Nov 12, 2009
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Government looks to TARP for debt help

John Dimsdale Nov 12, 2009
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Kai Ryssdal: The Treasury Department reported today that the deficit for October hit $176 billion. Needless to say, a record. The White House would love to get that number well down into non-record territory. And they’re said to be looking at one of the sources of the red ink — the Troubled Asset Relief Program — as one way to help do that. Marketplace’s John Dimsdale explains how it might work.


JOHN DIMSDALE: The TARP account still has $210 billion. But all that money was borrowed in the first place adding to the deficit. This year’s total deficit is projected to hit $1.4 trillion. If the TARP money isn’t spent, meaning not borrowed, the estimated deficit would drop to $1.2 trillion.

Budget expert Stanley Collender at Qorvis Communications says every little bit helps.

STANLEY COLLENDER: It’s not so much that they’re not going to spend money. It’s that they’re not going to spend money compared to what had previously been projected to be spent. And therefore the outlook for the deficit will get that much better and government borrowing will be that much lower.

Not spending the borrowed TARP money shows a deepening concern about growing deficits on the part of the administration. But Christopher Whalen at Institutional Risk Analytics says it’s too early to start counting that money.

CHRISTOPHER WHALEN: You could have use for the TARP money unfortunately, and it might be for some regional lenders that could use some additional capital they can’t raise in the market right now.

And, Whalen says, don’t forget the TARP program has already spent nearly $500-billion in borrowed money to prop up banks. That’s contributing to the deficit.

WHALEN: Because we’re going to lose money on TARP too. We’re not going to get our money back, and we already have taken a loss on several other companies that have been restructured. So in the grand scheme of things, it doesn’t really matter.

Whalen says given the unpopularity of the TARP program, he thinks the Obama administration is gaining a political, if not so much a fiscal, benefit.

In Washington, I’m John Dimsdale for Marketplace.

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