In his State of the Union address, President Barack Obama proposed using $30 billion in bailout funds for small business lending. He later repeated the idea in Nashua, N.H.
Both times, Obama said he’d use bailout funds that were “repaid” by financial firms to the government – conjuring up the politically appealing image of taking money from a chastened Wall Street and sending it straight to Main Street.
But Obama’s description didn’t give an accurate picture of how he plans to pay for the new program. And his comments sowed controversy and confusion on Capitol Hill.
In reality, the administration is proposing taking $30 billion from the unspent portion
of the Troubled Asset Relief Program to seed the new initiative, not – as Obama’s language suggested – taking the funds from the approximately $170 billion that banks have returned to government coffers.
While that distinction seems painfully technical, it carries significant political weight on Capitol Hill. The reason: The legislation creating TARP dictates that repaid funds must go to pay down the national debt
White House officials didn’t say why Obama specifically talked of using “repaid” funds in both settings – including the State of the Union address, where every word is carefully vetted.
But they say Obama didn’t intend to suggest that the actual repaid TARP funds would be used.
Administration officials have changed the way they describe the program. On Thursday, Geithner told the Senate Budget Committee that “we will support legislation that would take existing authority that we've reserved under the TARP,” to fund the new lending program.
Obama, too, has changed his rhetoric. Speaking to a group of small business owners Friday, the president described the initiative as a lending program “that would take $30 billion of the fund originally used to rescue big banks on Wall Street, and use it to provide lending capital to community banks on Main Street.”