Obama "May" Extend TARP

This should be no surprise. TARP expires at the end of the year, so of course the Obama administration is considering extending it.

The Obama administration is leaning towards extending the troubled asset relief programme into next year, retaining part of the $700bn war chest in case of another financial emergency.

Although no final decision has been made, officials in the Treasury are wary of letting the fund expire as scheduled at the end of the year and are seeking to allay criticisms and fears about the future use of Tarp, which has been tapped to provide capital injections in a variety of companies from Citigroup to General Motors.

But the administration is expected to extend its ability to make Tarp investments until October next year – without having to return to Congress – in case of another unforeseen calamity that can be mitigated with government money.

If the administration were to give it up but then try to secure additional investment funds, it would face a potentially hostile Congress. Even extending it as authorised will face resistance.

So, because they might not be able to get more money from Congress, of course they want an extension. The claim is "just in case", but is the state of Citigroup, which is largely unknown and GMAC, which just failed the latest stress test, a new unknown financial crisis event?

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