According to multiple reports, the Treasury Department has allocated nearly $10 billion more in funds from the Troubled Assets Relief Program (TARP) than Congress has officially released, “effectively making more promises than it can afford to keep.”
Under the TARP legislation, Treasury is allowed to hand out $350 billion of the $700 billion program, and must make a formal request in order to use the rest of the money. However, with the $6 billion allocated to auto-finance company GMAC on Monday, Treasury has appropriated $358.4 billion, which the Wall Street Journal notes “suggests Treasury is tapping into the second half…before it has been released by Congress.”
Treasury defended its actions, claiming that “the agency has complied with the [TARP] legislation” because it has not literally dispersed $350 billion, but has merely decided where it would like to send the money:
A Treasury spokeswoman declined to comment Tuesday on whether the newest commitments were based on the assumption that Congress would release the second installment, or would require reallocating money that had been promised to others.
As Sen. Bernie Sanders (I-VT) said, “They are pushing the envelope here…What they are trying to do is create a situation to put pressure on [President-elect Barack] Obama and the Congress to provide the next $350 billion.” Indeed, Treasury has put Obama in a position from which he may have to renege on the department’s promises, if Congress decides to withhold the second TARP installment.
As The Wonk Room has noted before, it is critical that at least a portion of the remaining TARP funds be directed toward foreclosure relief. Sen. Chris Dodd (D-CT) and Rep. Barney Frank (D-MA) are reportedly drafting legislation to do just that, but it appears that Treasury, intentionally or not, is already tying Congress and the next administration’s hands.