Senate Passes Bennet ‘Pay It Back’ Plan to End Revolving Bailout Fund
Bennet Amendment Winds Down TARP to Pay Down the DeficitMay 11, 2010
Washington, DC -- The Senate today passed an amendment authored by Michael Bennet, U.S. Senator for Colorado, to cut the size of the bailout and to end the revolving bailout fund passed with unanimous, bipartisan support.
Bennet's bipartisan amendment reduces the size of the bailout fund known as TARP by $150 billion and prevents Treasury from redirecting unused funds for new programs. It would also ensure that repaid banking, housing and auto bailout funds - totaling more than $180 billion to date - are used to pay down the deficit, not fund further spending. Fiscally responsible measures like Bennet's to pay down the deficit are critical as the national debt is approaching $13 trillion.
Bennet's amendment, which is based on his bipartisan ‘Pay It Back' Act introduced last year, is the most recent amendment to a bill to crack down on big bank abuses and create new rules of the road for Wall Street.
"The Pay It Back Plan is a great addition to the Wall Street reform bill," said Bennet. "Taxpayers who were forced to bring the big Wall Street banks back from the brink of collapse are now assured that the bailout fund is being wound down. This amendment will ensure that paid back bailout funds will be used to pay down the deficit, so our kids aren't saddled with a debt Washington is unable to pay."
Specifically, the ‘Pay It Back' Plan captures funds from taxpayer investments in financial institutions and auto companies through the Trouble Asset Relief Program (TARP), taxpayer investments to stabilize Fannie Mae and Freddie Mac, and unused stimulus funds and makes sure that these funds are used to pay down the national debt and not for additional spending. It also establishes a sunset for unused stimulus funds.
As of March 31st, 77 TARP recipients had returned a total of $180.8 billion to the U.S. Treasury. The Pay It Back plan would prevent that money from being used for further spending on new programs or reused by the TARP, effectively leaving banks unable to count on future TARP assistance and forcing them to shape up.
The Bipartisan Pay It Back Plan would:
- Get Taxpayers' Money's Worth from TARP - The amendment reduces TARP's authority by about $150 billion and prevents Treasury from redirecting unused funds for new programs. As financial institutions regain their health, the Pay It Back Plan also captures repaid TARP funds and applies those funds for deficit reduction. This includes revenues generated from the sale of Chrysler and GM stocks. Specifically, the amendment restricts TARP's $700 billion revolving door of credit. Although some healthy companies have already repaid assistance, TARP currently allows the Treasury to keep $700 billion "outstanding at any one time." The amendment prohibits Treasury from using repaid funds barring an immediate and substantial threat to the economy arising from financial instability as the TARP is wound down.
- Get Taxpayers' Money's Worth from Fannie Mae and Freddie Mac - The amendment requires returned investments from the sale of Fannie Mae and Freddie Mac stock or securities to be used for deficit reduction. It also requires the Federal Housing Finance Agency (FHFA) to provide a report to Congress on efforts to ensure the American taxpayer does not suffer unnecessary losses.
- Exercise Responsible ARRA Oversight - The amendment requires inspectors general and agency secretaries to identify and capture any ARRA funds that have been turned down or unobligated and directs such funds to pay down the national deficit.
- Establish an ARRA Sunset - The amendment ensures that ARRA funds not obligated by December 31, 2012, will be returned to the Treasury and used to pay down the national deficit.
The Pay It Back Plan does not undermine emergency and recovery efforts. Rather, it sets a schedule for getting the government out of the business of owning businesses. This bill looks at critically open-ended policies - created to weather a real economic disaster - and establishes a responsible ‘exit strategy' that will protect and benefit the American taxpayer.