The Obama administration is set to lower its estimate of the cost of the troubled asset relief programme when it celebrates the end of the bail-out effort next week, senior administration officials say.
Many in the administration have become exasperated that the $700 billion scope of the programme is often used in describing it and that it is widely seen as a Democratic initiative when it was created by the Bush administration and backed by almost half of House Republicans.
The Congressional Budget Office now pegs the actual cost at $66 billion but the Treasury is expected to produce a lower estimate next week. Some officials and executives whose companies still owe Tarp money believe the final tally could see the government make a profit, depending on the initial public offering of General Motors and eventual sale of shares in AIG.
Tim Geithner, Treasury secretary, gave his strongest defence of Tarp on Wednesday ahead of its two-year anniversary and offered congratulations to those Republicans who backed it.
Saying it was now recognised as “one of the most effective emergency programmes in financial history”, Mr Geithner told officials, and later lawmakers, that there was “something to embrace about Tarp”.
“If you are a conservative Republican, you can celebrate the fact that we solved the most dangerous part of this financial crisis largely with private capital, not public capital,” Mr Geithner told a congressional hearing. ?“And you can welcome the fact that we have reduced those investments in the American financial system to a tiny fraction of those I inherited.”
With economic growth sluggish, lawmakers have shied away from trumpeting Tarp, even though many economists and bankers say it shored up the financial system.
“I don’t think anybody is going to campaign on it,” said Barney Frank, Democratic chairman of the House financial services committee. But he added Mr Geithner’s comments on Tarp were needed: “It was important to say that.”
Republicans will pledge today in their election manifesto to “cancel” Tarp and reclaim unused funds.
Herb Allison, who revealed on Wednesday he was stepping down from overseeing Tarp, said: “We can understand why it was unpopular. After all, nobody likes to bail out the big banks.”