$700B bailout program extended until October

WASHINGTON — The Obama administration has extended the $700 billion financial bailout program until October, setting up a struggle between Democrats who favor using some of the leftover money to help generate jobs and Republicans who say it should be used to shrink soaring budget deficits.

The administration insists the bailout fund is still needed to prevent further turmoil in the banking system. In announcing the decision Wednesday, Treasury Secretary Timothy Geithner said extending the program also will help homeowners struggling to avoid losing homes to foreclosures and small businesses having trouble getting loans.

The decision came on the same day the administration acknowledged two key bailout programs lost a total of $61 billion. The bailout of insurance giant American International Group Inc. and the lifeline thrown to struggling automakers each cost more than $30 billion, according to Treasury data disclosed in a report from the Government Accountability Office.

The administration is now projecting the losses to the government from the bailout program will be around $141 billion — $200 billion less than it estimated two months ago.

President Barack Obama said the freed-up money can help reduce the record-high federal budget deficit and "invest in job creation on Main Street rather than Wall Street."

Obama spoke to reporters after a meeting with congressional leaders aimed at providing momentum for a new jobs program he outlined Tuesday. That effort seeks to combat the nation's 10 percent unemployment rate by providing tax breaks to encourage companies to hire new workers, increase bank lending to small businesses and provide a fresh round of infrastructure spending.

The administration has not provided details on the size of the new spending package. But Democratic leaders suggested it could cost between $75 billion and $150 billion.

Democrats initially hoped to pass Obama's proposals this month. But the proposals likely will slip until early January, given opposition from Republicans and the to-do list already facing Congress as it struggles to finish business before Christmas.

Both the administration and Democratic leaders have indicated they want to divert some of the unspent bailout funds to a jobs program. Their goal is to refashion a hugely unpopular program viewed by voters as a taxpayer-funded bailout for big Wall Street firms that then paid out millions of dollars in lavish bonuses.