Geithner's "Incredible" New Justification For Recycling Bailout Money (VIDEO)
Treasury Secretary Timothy Geithner said on Thursday that he has "no plans to request additional funding" for the $700 billion Troubled Asset Relief Program. Of course, he wouldn't need to request additional funding, because, per his April declaration that the depleted TARP would benefit from $25 billion in repaid funds, the program can regenerate money like the T-1000 can regrow limbs.
Nevermind the law that says the taxpayer is supposed to get his money back when bailed-out firms return funds, and that the previous administration promised this kind of recycling would never happen.
At a Senate hearing on Wednesday, Sen. Jim DeMint (R-S.C.) questioned Geithner about the recycling: "If over the next six months $50 billion comes back, will $50 billion go into the general fund of the United States?"
Geithner responded that money returned to the TARP creates "additional head room" -- like the Lernaean Hydra.
"The way the TARP is designed -- and I didn't design this -- but the way it's designed is every dollar that comes back goes into the general fund but that does still create additional head room under the $700 billion authority for us to make capital investments," Geithner said. "So we have the ability to still use the $700 billion if we think there's a strong case for doing that, but the way the program works is a dollar comes in and goes to the general fund but still creates additional room for us to make a new..."
"So your understanding of what we did is that the Treasury now has $700 billion that it can use permanently," DeMint said, "rotating in and out of the capital markets as you see fit?"
"Well, I'm not quite sure permanent, but you're right," Geithner said.
What Geithner said represents an escalation over Treasury's previous justification. The law says revenue from the sale of troubled assets "shall be paid into the general fund of the Treasury for reduction of the public debt." A Treasury spokeswoman told the Huffington Post earlier this month that repaid principal from investments in preferred shares landed back under the TARP. But now "every dollar" that comes back goes into the TARP.
"This is incredible," wrote economist Dean Baker, co-director of the Center for Economic and Policy Research, in an email to the Huffington Post. "I had thought that Geithner's argument for being able to recycle TARP money hinged on making a distinction between money that went to buy troubled assets, where the wording seems to explicitly rule out recycling, and money that was used to buy preferred shares. There is no explicit wording on the latter because Congress had been told that the money it was approving would be used to buy troubled assets."
Baker continued, "Instead of resting his case on this distinction, Geithner is apparently trying to say that the explicit wording, requiring repaid TARP money to be returned to the Treasury, has no meaning. In his testimony, he is claiming that Congress approved a $700 billion revolving fund, even though the wording is obviously intended to mean the opposite."
The Treasury Department did not immediately respond to an inquiry from the Huffington Post.
WATCH Geithner's remarks:
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Posted: 05-22-09 12:54 PM