Administration to slash bailout cost estimate

WASHINGTON – The Obama administration plans to cut its estimate of the projected costs of the government bailout program by more than $200 billion and is looking at using part of the savings to fund new job creation efforts.

A Treasury official said Sunday that 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 reduced cost estimate reflected faster repayments by big banks and less spending on some of the rescue programs.

The administration had made the $341 billion estimate as part of its midsession budget review released in August.

The official said the new estimate will become part of the administration's new budget, which President Barack Obama will present to Congress in February.

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.

Obama is scheduled to give a speech on the economy Tuesday and White House officials have said it is likely that the president will talk about using repaid TARP funds for a new job-creation program.

House Speaker Nancy Pelosi and other top Democrats have been drafting a jobs bill that would tap resources in the bailout program.

Among the proposals being considered are funding as much as $70 billion in new transportation and infrastructure projects, providing new tax credits aimed at encouraging small businesses to hire workers and providing additional aid to state governments to preserve public sector jobs.

Republicans have voiced opposition to this approach, arguing that the money should be used to lower the government's ballooning deficits.

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.

Lowering the estimated cost of TARP will also lower the administration's projections for budget deficits.

The deficit for the 2009 budget year, which ended in September, hit a record $1.42 trillion and the administration in August projected a slightly higher deficit for the current year.