(CNSNews.com) – House Majority Leader Steny Hoyer (D-Md.) said Tuesday that Congress would have to enact new legislation in order to realize House Speaker Nancy Pelosi’s (D-Calif.) goal to spend leftover funds from the Troubled Asset Relief Program (TARP) for job creation, rather than using them to pay down the national debt.
CNSNews.com asked Hoyer at his weekly “pen-and-pad” briefing: “With President Obama calling perhaps to use TARP funds for a jobs package, do we have to go back now and enact new legislation? Because the current law (says) that the money has to go to financial services institutions and that the returned funds would pay down the deficit.”
“I think the answer is yes,” the number two Democrat in the House said. “We would have to enact new legislation.”
Hoyer’s comment came after Republicans began questioning the legality of using TARP funds to pay for new spending aimed at creating jobs, an idea which Democrats began floating last week.
The current law, the Emergency Economic Stabilization Act of 2008, says that TARP funds that were originally allocated to buy toxic assets from struggling banks are to be given only to financial institutions and that when those funds are returned to the federal government, they should be used to pay down the national debt. Roughly $200 billion in funds remain unspent on banks.
Instead of focusing on paying down the deficit, though, Democrats have recently begun to signal that they would prefer to use the money on investments aimed at creating jobs.
Speaking at her weekly press conference last Thursday, Speaker Pelosi said that she hoped to get a bill through the House by the end of the year focused on creating jobs through infrastructure investment and small business aid -- and that she wanted to pay for it with unallocated TARP funds.
“It would be my hope that we could get something done by the end of this year,” Pelosi said of the prospective package. “It all depends on the legislative process, but we are working to that end, and we wanted the investments that we have in jobs to be paid for by TARP funds.”
Pelosi tried to downplay the notion that Democrats had bailed out Wall Street with TARP and left the average American struggling. The funds, she said, would go to “infrastructure (and) small business, small business, small business, small business investments,” she stressed, “to be sure that credit truly flows to Main Street. We (will) consider the Main Street Initiative at the same time we have regulatory reform for Wall Street.”
On Monday, Rep. Jeb Hensarling (R-Texas), the only congressman on the Congressional Oversight Panel (COP) created to monitor the bailout fund, sent Pelosi a letter Monday calling her plan would make TARP into a “revolving slush fund.”
Citing reports that she would use TARP “to pay for programs unrelated to the financial emergency” of 2008, Hensarling said he was writing to “oppose this ploy in the strongest possible terms.”
“TARP was never intended to be used as a revolving slush fund to pay for the (Democratic) Majority’s political, economic or social agenda,” he continued. “Any unused or repaid TARP funds should be returned to those who originally paid for it – the American taxpayers.”
Hensarling told Pelosi that “current law states that repaid TARP funds are to be used to reduce the debt” and reminded Pelosi that she had told Americans in September 2008 that they would be “repaid in full.” Indeed, before passing the bill that created TARP last year, Pelosi said it would “include a plan to ensure the taxpayer is repaid in full.”
Hensarling is one of five members on the oversight panel, which oversees the Treasury Department in its administration of the program to “guarantee that Treasury’s actions are in the best interest of the American people.”
The panel, which also includes a Harvard law professor, a state bankng regulator for New York, an AFL-CIO union attorney and a former commissioner of the Securities and Exchange Commission, has the authority to hold hearings on the usage of TARP and evaluate the pursuant data, making Hensarling a congressional expert on the program.
Also on Monday, Sen. Judd Gregg (R-N.H.), the ranking Republican member of the Senate Budget Committee, urged Democrats not to “lose sight” of the fund’s original purpose.
“Unused TARP funds were never meant to be used as a slush fund to help fuel massive Democratic expansion of government or new stimulus exercises,” Gregg said in a statement. “Doing so runs counter to what officials in this administration promised, and it turns an important financial system rescues program into a mid-term election rescue scheme.”
Gregg said the $200 billion in funds remaining in the TARP program need to be put toward the deficit “as our nation faces record levels of spending and rising debt levels.”
He added that the extra money did not represent a way to offset “new spending ideas.”
“(F)or the sake of our children’s futures, we must be vigilant not to add more deficit spending and debt,” the New Hampshire senator said.
In answering another question Thursday, however, Pelosi explained that she believed job creation and deficit reduction were not interdependent.
When a reporter asked whether using TARP funds to pay for new investments would be an alternative to using a proposed financial transaction tax, Pelosi explained: “I believe that the TARP funds would be a good source (to) pay for this. Let me just put this in perspective for a moment. What we have to do is grow the economy. We must create jobs in order to do that. The more jobs we create, the more money comes into the public till and, therefore, reduces the deficit.”
“I don’t see competition between do you reduce the deficit or do you create jobs. Creating jobs reduces the deficit. I think the TARP funds are appropriately used to create jobs to reduce the deficit.”
But Section 106 of the bill specifically describes the requirements for money that is returned to the government: Revenues of, and proceeds from, the sale of troubled assets under this act . . . shall be paid into the general fund of the Treasury for reduction of the public debt.”
Moreover, the $200 billion that was never spent is still subject to a provision of the bill (Section 101), which describes the purchases of troubled assets.
“The (Treasury) Secretary is authorized to establish (TARP) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary and in accordance with this Act and the policies and procedures developed and published by the Secretary.”