Treasury may have to request funds from Congress

The Hill, Leading the News-

Treasury Secretary Henry Paulson is close to running out of money and soon may have to ask Congress for access to the rest of the $700 billion package it approved for rescuing the economy.

Paulson has said that he intends to leave the second $350 billion of the package for President-elect Barack Obama's administration, but the government's moves in just the last two days leave Paulson with only about $20 billion in funds for the nearly two months remaining until Obama’s inauguration.

The continuing market volatility and tough credit markets could force Paulson to seek access to the funds, particularly as the government continues to unveil new programs to prop up the economy.
On Tuesday, Paulson did not rule out requesting access to the remaining funds.

“When the time is right, we’ll avail ourselves of the congressional process,” Paulson said during a press conference.

Treasury has the authority to spend $350 billion of the $700 billion Congress authorized in October under the Troubled Asset Relief Program, known as TARP. The government has committed about $330 billion so far, leaving it with about $20 billion before it would have to make its request to Congress.

Paulson must submit to Congress a plan on how Treasury would use the money in order to access the final $350 billion. Lawmakers could choose to restrict how Treasury can use the money.

Two new efforts that the government announced this week have pushed Paulson closer to having to make a request.

One day after putting together $20 billion in aid for Citigroup, Treasury announced it would provide $20 billion to the Federal Reserve for credit protection as part of the two new programs to prop up the home mortgage and consumer credit markets.

The Federal Reserve offered assurances Sunday on $306 billion in troubled assets for Citigroup as part of the effort to save the firm, which was seen as being on the verge of collapse.

The government has set up a new $200 billion program aimed at unfreezing lending in the consumer credit markets for student loans, car loans and other asset-backed securities. Paulson also suggested that the program could be expanded to additional types of assets, such as commercial mortgage-backed securities and non-agency residential mortgage-backed securities.

“That $200 billion is a starting point. This is — it's going to take a while to get this program up and going. And — and then it can be expanded and increased over time,” Paulson said.

The Federal Reserve set up a program on Tuesday that could support up to $600 billion in debt issued by or backed by the hobbled government-sponsored enterprises, Fannie Mae and Freddie Mac. "Nothing is more important to getting through this housing correction than the availability of affordable mortgage finance," Paulson said.