The Treasury Department recently released its annual Financial Report of the U.S. Government, reporting on the budget deficit, net operating costs, debt projections, and all government liabilities on an accrual accounting basis.
An editorial yesterday in the Wall Street Journal called on the Administration to support the reform of the two housing financing enterprises originally sponsored and now owned by the federal government, Fannie Mae and Freddie Mac, and at a minimum, to show the full cost of those organizations in its budget.
President Obama has just proposed a fee on financial firms, stating his commitment “to recover every single dime the American people are owed.” The measure, called the Financial Crisis Responsibility Fee, will only apply to the largest firms with over $50 billion in assets. The White House expects it to raise $117 billion over 12 years and $90 billion over the next ten.
The Federal Reserve announced, this morning, that it will transfer $46.1 billion in FY2009 profits over to the Treasury, higher than the $31.7 billion in 2008 profits (Thanks to Donald Marron for pointing this out). The Fed reported that the increase in profits was due largely to earnings on additional securities holdings.
The IRS has agreed to give up billions in tax money in exchange for Citigroup’s repurchase of $20 billion of its assets held by TARP. In a notice released on Friday, the IRS will exempt up to $38 billion in future Citi profits from taxable income.
General Motors and Wells Fargo have both just announced that they intend to repay all of the $6.7 billion and $25 billion, respectively, in outstanding TARP investments. GM said it hopes to repay the Treasury by the end of June, but Wells Fargo did not offer a time frame.
According to a Donald Marron, reallocating TARP funds to use for other purposes (such as a jobs bill) may violate the letter of the law (and certinaly violates the spirit of it).
In his speech today, President Obama proposed reducing the amount of money available in the TARP fund to pay for the new stimulus measure. When TARP was created, Congress authorized the Treasury to use up to $700 billion for purchasing troubled financial assets. Currently, about $300 billion remains available, and so policymakers could technically rescind part of that money to pay for new stimulus costs.
Secretary Geithner recently said that the Administration will outline its exit strategy for TARP in the next few weeks, but the expiration date has still not been set. He recently stated that they were “close to the point where we can wind down this program and stop making new commitments,” but that they were “not quite there yet.”
UPDATE: Treasury Secretary Geithner testified on Nov. 19 before the Joint Economic Committee, stating that "we are winding [TARP] down and will close it as soon as we can." Secreatry Geithner also stated that the Treasury will use "substantial resources" from remaining TARP cash to pay down some of the debt (see our commentary here for why such a statement is a bit misleading).
