HOW TO LEGALLY DEPLOY TARP FOR JOBS: One of the questions Republicans are asking about Obama's jobs speech today is how he can legally deploy TARP dollars to fund a new stimulus bill. After all, the TARP law was fairly clear that the money had to be used for purchases of toxic assets. The Administration was able to squeeze the car maker bailout under that rubric, but it is not so clear that a jobs bill could qualify as purchasing a toxic asset. 'Despite the objections of many Republicans, they were able to use TARP for the auto-bailouts because they were able to claim that the car manufacturers were toxic assets under the terms of the original TARP law,' said Brad Dayspring, the press secretary for Republican Whip Eric Cantor (R-Va.) 'That claim cannot be made for highway/infrastructure projects.'
But an administration official explains to POLITICO that's not what the Obama team is contemplating. Instead of using TARP funds to finance a new jobs bill, they will simply declare that they need less money under TARP than they thought. Since TARP was effectively a line of credit, and Treasury has not drawn down the unused funds, that allows Congress some room to spend money on a new bill without increasing the projected deficit for next year. Next year's deficit projections already assume that Treasury would spend the entire $700 billion. If Treasury spends less, that means next year's deficit will be less than expected. But if Treasury spends less, and Congress spends more – by the same amount – the deficit projection figure stays flat. Got it? As the administration official explains: 'The idea is not to take dollars that are in TARP and spend them on something else. Instead, TARP has used less than expected, and that frees up Congress to spend other new money. '