December 7th, 2009
05:03 PM ET

Financial Dispatch: White House to slash bailout cost by $200 billion

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/08/07/art.gfx.wallst.jpg]

Andrew Torgan
CNN Financial News Producer

The Obama Administration is expected to slash the estimated cost of the Troubled Asset Relief Program by $200 billion, effectively paving the way for a massive federal jobs program.

The latest projection, which will be officially unveiled by the White House this week, would cut TARP's price tag by $200 billion to $141 billion, according to a Treasury Department official.

And officials tell CNN that President Obama will recommend using the $200 billion to fund a series of projects - including building bridges and roads and weatherizing homes, as well as providing further aid to the unemployed and to small businesses. That’s expected to come in a speech on Tuesday.

Such a move is certain to draw fire from Republican lawmakers, who have railed against using any leftover bailout funds or money that has been paid back by banks for any new projects.

Many have not only proposed shutting down the program altogether, but argued that any unallocated TARP funds should go toward cutting the nation's bloated deficit. The Treasury Dept. currently estimates that the annual deficit for fiscal year 2010 will hit a record $1.5 trillion.

Also on the bailout front, Fed Chairman Ben Bernanke says he's confident the central bank will make money on the trillions of dollars it’s pumped into the economy since the start of 2008.

“I think we're in very good shape,” Bernanke said, answering questions following a speech at the Economic Club of Washington. “I do believe we're going to get back all the money, and indeed we'll be showing for the taxpayers fairly significant extra income.”

But most of Bernanke's speech was focused on the outlook for the economy, and he repeated his earlier forecasts of moderate growth through next year, dogged by continued high unemployment.

He said the economy continues to face “formidable headwinds” that are likely to result in only a moderate recovery.

Stocks kicked off the new week with a choppy session - driven by a strong dollar, falling oil and gold prices and those comments from Bernanke that cooled worries about higher interest rates.

At the close of trading, the Dow gained just a single point to close at 10,390.11. The Nasdaq and the S&P 500 both ended fractionally lower.

The week ahead brings a modest array of economic reports. Highlights include readings on retail sales, weekly jobless claims, consumer sentiment and the trade gap.

Finally, the new “must-have” accessory in your wallet or purse next season might be your pay stub.

The Federal Reserve is proposing new rules that would make it harder for retailers to offer you a credit card at the cash register by dangling a discount.

You know the drill: get 20% off or no interest payments for 18 months if you apply for a store’s credit card on the spot.

The new restrictions would make retailers collect more detailed financial information from customers - including how much money you make - before giving your so-called “instant credit.”

But the National Retail Federation is pushing back, and is asking the Fed to reconsider the proposed rules. The NRF says the current practices are quote, “safe, valued and desired by both retailers and customers.”

Many retailers have actually sold off their credit card units to banks in recent years, but still use the cards to track spending habits and reward customer loyalty.

For its part, the Fed wants the new, tougher rules to protect consumers from being lured into taking on debt they ultimately can't afford to pay off. After all, we know where that got us, don’t we?

Follow the money… on Twitter: @AndrewTorganCNN

Filed under: 360° Radar • Bailout Turmoil • Economy
soundoff (No Responses)

Comments are closed.