Obama Eyes TARP Funds for Jobs Bill, Triggering GOP Ire

President Obama is almost sure to ask Congress Tuesday to use unspent TARP funds to finance a one-year jobs package that could cost upwards of $100 billion.

"That's certainly one of the ideas," White House Press Secretary Robert Gibbs said, referring to spending TARP funds on a jobs package. "I think that's likely."

House Speaker Nancy Pelosi first suggested tapping bank bailout funds to finance the Democrats jobs bill. After initial White House and Treasury Department resistance, the administration appears now committed to leveraging TARP funds.

Officials cited two principle reasons: 1). the funds could allow the White House to "pay" for the jobs legislation without resorting to offsetting tax increases or spending cuts - something Obama specifically ruled out at Thursday's jobs summit at the White House; 2). improve the political optics of the much-maligned bailout package.

"I think it’s a good idea," said Jared Bernstein, top economist to Vice President Joe Biden, told Fox News on Friday. "This a program that is, granted, not the most popular one we have. And one of the reasons is that while it helped to stabilize folks (on Wall Street), you’ve still got tremendous job market pain on Main Street. So, if there is a way to use TARP funds to help boost employment, help contribute to some of the job programs to get us over this gap and help put more downward pressure on that unemployment rate, then sure, it makes a lot of sense."

Obama will call Tuesday for Congress to approve these items to boost job growth: more spending for cash-strapped states; more funds for road, bridge and other infrastructure projects; aid to  small businesses in the form of  tax credits or direct loans; more spending for green-friendly private-sector and public-sector weatherization projects.

Other items could be added to the package, White House officials said. No final price tag has been determined, they said.

House Democrats have drafted a $70 billion jobs package that includes many of these items, but not weatherization funds, called by some in the White House and Capitol Hill "cash for caulkers."

Congressional Republicans want unspent TARP funds - and loans repaid by the banks already - to be used exclusively for debt reduction. Republicans argue a section of the TARP law  directs unspent funds and repaid loans to debt reduction. Congressional Democrats dispute this interpretation.

"It's an outrage," said Sen. Judd Gregg, R-N.H., ranking member of the Budget Committee. "It's an absolute outrage. And you know who pays the bills? Our kids. It's not right. It's not fair and it's not appropriate."

Section 106 (d) of the TARP legislation reads as follows: "Revenues of, and proceeds from the sale of troubled assets purchased under this Act, or from the sale, exercise, or surrender of warrants or senior debt instruments acquired under section 113 shall be paid into the general fund of the Treasury for reduction of the public debt."

Gregg said the White House and congressional Democrats see the TARP funds as a trough of unspent money, not one-time only funds raised in dire circumstances to stabilize a financial system on the brink of failure. Gregg said TARP funds should fulfill that limited purpose or pay down the federal debt, now just over $12 trillion.

"They see this pool of money coming back in... doing what it was supposed to do which was stabilize the financial institutions (and) then come back to the taxpayers to reduce the debt," Gregg said. "That's what we all agreed on. But a bunch of guys are here and (have) said 'Oh let's go out and spend it. We got this money. Let's spend it.'"

Asked if Obama believes Congress needs to change the TARP law to allow for spending on a jobs bill, Bernstein demurred.

"I'm going to let the president lean into that kind of a distinction on Tuesday (in his speech). It's an important question. And it's one we're obviously considering. But I don't want to get out ahead of him on that."

Brendan Daly, spokesman for Pelosi, told Fox that Democrats believe they can use unspent TARP funds - totaling $226  billion - for other purposes without changing existing law.

The Treasury Department has said it's permissible to "recycle" TARP fund that haven't been used or have been repaid by once-distressed banks. Funds off limits, according to Treasury, are profits and dividends banks paid to the government as part of their loan agreements.