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Obama says bailout has ‘turned a profit’
President Obama on Tuesday asserted that the government has “turned a profit” with taxpayer bailout money now being repaid by large financial institutions, seeking for the second straight day to bolster public confidence in his handling of the economy.
Treasury Department officials announced that they were allowing 10 of the nation’s biggest banks to repay $68 billion in funds lent to them last fall at the height of the financial crisis through the $700 billion Troubled Asset Relief Program, or TARP.
“It is worth noting that in the first round of repayments from these companies, the government has actually turned a profit,” Mr. Obama said during an event at the White House promoting a move to tighten spending controls for the federal budget.
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The banks have paid $1.8 billion in dividends on the loans, which constitutes the profit heralded by Mr. Obama.
But the president also cautioned that the country “will not escape the worst financial crisis in decades without some losses to the taxpayers.”
But Mr. Obama’s remark reverberated beyond the $700 billion bailout to the broader debate about whether the federal government is the appropriate entity to be taking majority stakes in companies such as General Motors, following its giant automaker’s bankruptcy filing and attempts to rebuild its business lines.
The administration has faced questions over the federal government’s ability to manage private companies and the impact of government intervention in industries ranging from finance to health care.
The president addressed these doubts head-on.
“I’ve said repeatedly that I have no interest in managing the banking system or for that matter running auto companies or other private institutions. So today’s announcement is welcome news to me,” he said.
Treasury Secretary Timothy F. Geithner said the “repayments are an encouraging sign of financial repair, but we still have work to do.”
The Treasury did not announce which banks would be allowed to pay back the money, but institutions such as Goldman Sachs Inc., JPMorgan Chase & Co., and American Express Co. have made no secret for weeks that they wanted to repay their portion of TARP funds.
The institutions have grown uncomfortable with the prospect of government influence over business decisions, but until this week Mr. Geithner had indicated they would not be allowed to buy back warrants held by the Treasury until the government deemed it appropriate.
The president made his comments about TARP payments at a White House event to promote his call for legislation to require that Congress offset any new spending increases or tax cuts, in what is called Pay-As-You-Go, or PAYGO.
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