A key House Republican introduced a bill Monday that will set a Dec. 31 deadline for the Treasury Department to lend money to troubled financial institutions.
The government launched the $700 billion TARP -- or the Troubled Asset Relief Program -- last fall to bail out banks and other financial institutions whose collapse posed a systemic risk to the US economy. Treasury has since allocated more than $600 billion to dozens of banks, the American Insurance Group (AIG), and failed automakers GM and Chrysler, among other companies.
"It's time to terminate the TARP program," Rep. Jeb Hensarling, R-Texas, told reporters on Monday. "TARP is increasingly not being a vehicle for economic stability and taxpayer protection but is evolving into 700 billion dollar revolving slush fund that the administration can use to advance economic, social and political agenda items far and apart from what Tarp was ever designed to do."
Hensarling, who is the only sitting member of congress on the Congressional Oversight Panel -- the five-member board tasked with overseeing the allocation of TARP funds, said his legislation calls for reducing the amount of the TARP program by recalling all currently unspent funds and sets a Dec. 31, 2009 deadline for the allocation of TARP funds.
The bill would also kill a provision in last year's Emergency Economic Stabilization Act that would enable Treasury Secretary Tim Geithner to renew the TARP program for two more years.
"The economy is in serious condition but we have gone past the emergency point. I fear that TARP is no longer what Congress thought it was when it passed it and I certainly do not believe it's what the American taxpayer thought it was," said Hensarling, who sits on the House Financial Services committee.
It also requires the Treasury to accept TARP repayments from "safe and sound" institutions without additional mandates and adjusts treatment of warrant preferred shares to entice TARP repayment.
The Texas Republican is especially concerned that the White House is making it unreasonably difficult for financial institutions to repay TARP funds by "changing the rules."
"Treasury has put hurdles that should not be there," Hensarling said, noting Geithner's recent comments that even if institutions are considered "safe and sound" by regulators, they may still face additional requirements before they are allowed to pay back the government.
"You can argue that the administration or Congress has changed the deal," he said, noting his bill will smooth the path for TARP recipients to return the money to Uncle Sam.
Hensarling is seeking allies from both sides of the aisle including California Democrat, Rep. Brad Sherman, an outspoken critic of the TARP program.
Sen. John Thune, R-S.D., is also set to introduce similar legislation on the Senate side but details are not yet available.