WASHINGTON - The government will lose $200 billion less than expected from the federal bailout program, and the Obama administration is looking at using part of the savings to pay for new job creation efforts.
President Barack Obama said Monday the $700 billion financial bailout program, though still "not cheap," had turned out to be less costly than initial projections.
Speaking to reporters in the Oval Office, Obama said he would use a speech on the economy today to address proposals for what could be done with savings from the rescue program.
He said the administration was examining the possibility of shifting some bailout money toward job creation programs. One example, he cited: directing bailout money to help small businesses get the loans they need to expand their operations and hire new workers.
A Treasury official said the administration now believes the cost of the financial rescue program will be at least $200 billion below the $341 billion estimate it made in August.
The official, who spoke on condition of anonymity because the administration's new projection has not been released, said the lower estimate reflected faster repayments by big banks and less spending on some of the rescue programs as the financial sector recovered from its free fall more quickly than the administration originally expected.
The administration had made the $341 billion estimate as part of its budget review released in August.
The Treasury official said Monday that the new figures were being finalized in a report being prepared by the Government Accountability Office. That report is expected to be made public Wednesday.
The official said that the administration believes the losses incurred from the money already spent will total $42 billion. About half of those losses are expected to occur from the support provided to troubled automakers General Motors and Chrysler; the other half will come from the rescue package put together for insurance giant American International Group.
The $42 billion in projected losses from TARP spending that occurred in the 2009 budget year, which ended Sept. 30, is a sharp improvement from the administration's August estimate that those losses would total $110 billion. The loss figure represents the net loss to the government after subtracting earnings the government has received in interest and dividend payments.
The official said the new estimates will become part of the administration's new budget, which Obama will present to Congress in February. The reduction in projected losses from the rescue program will mean that at least some of the savings could be used to reduce the government's projected deficit, which the administration estimated in August would hit $1.5 trillion in the current budget year.
The $700 billion financial rescue program, known as the Troubled Asset Relief Program, was passed by Congress in October 2008 at the height of the worst financial crisis to hit the country since the 1930s.
Treasury Secretary Timothy Geithner indicated Friday that the administration was considering supporting not only increased job creation with the TARP funds but also helping to reduce future budget deficits.
Geithner said that the administration expected to have $175 billion in repayments from the banking system by the end of next year.
Treasury has spent about $450 billion from the TARP, including around $290 billion poured into banks.
Bank of America announced last week that it would return $45 billion it had received, adding to the $71 billion already repaid by nearly 50 other financial companies. Banks have also paid the Treasury about $7 billion in dividends.