As ten of the nation's biggest banks gear up to repay $68 billion in taxpayer bailout dollars, Congress is battling the Obama administration over what it can do with the money.
The latest salvo: Senators Orrin Hatch (R-Utah) and Blanche Lincoln (D-Ark.) have introduced a bill to prevent Treasury Secretary Timothy Geithner from reusing money for more bailouts.
The law governing the Troubled Asset Relief Program says that money coming back from TARP investments "shall be paid into the general fund of the Treasury for reduction of the public debt." But Geithner argues that because the law allows for $700 billion "outstanding at any one time," repaid money can be recycled.
TARP watchdog Elizabeth Warren, chair of the Congressional Oversight Panel, said last week that because the law is ambiguous, Geithner can have his way unless Congress does something to stop him. Hence, the Hatch-Lincoln effort.
"TARP has become a revolving fund for the Treasury to nationalize our nation's private sector by using taxpayer money to acquire banks, insurance companies and auto manufacturers," said Hatch in a statement. "When TARP was signed into law last fall, it was authorized to purchase up to $700 billion in toxic or troubled assets from financial institutions to restore liquidity to the system. Unfortunately, it is now being used as a go-to solution to address all of our nation's economic ills. This bill would change that."
A similar bill by Rep. Kevin McCarthy (R-Calif.) is moving through the House. A group of House Republicans who support the bill sent a letter to the White House last week questioning how repaid money could both reduce the national debt by $68 billion, as Obama said, and also be used to make additional investments under the TARP.
Rep. Brad Sherman (D-Calif.), says the law is clear enough the way it is: When money comes back, it goes to debt reduction. Though Sherman thinks the administration is breaking the law, he believes a bill to force the Treasury to use repaid money to reduce the public debt will backfire.
"It's clear that such a bill, if it were passed, would be vetoed," Sherman told the Huffington Post. "Its vetoing would then be used as an argument to say, 'See, we did have this right.'"
Other lawmakers are pushing efforts to use the money for something other than debt reduction or bailouts. Rep. Elijah Cummings (D-Md.) plans to introduce a bill this week that will allow the administration to use repaid TARP funds to help out-of-work homeowners.