WASHINGTON — Under heavy pressure to get Americans back to work, President Barack Obama on Monday suggested using a suddenly available pot of money left over from the government's bank bailout to help create more jobs.
Obama, who will address the subject in a speech Tuesday, has been struggling to trim the nation's painfully high unemployment rate, now at 10 percent, just below a quarter-century high.
He said there may be "selective approaches" for tapping into the money that was to go for propping up seriously ailing financial institutions. The administration and its allies on Capitol Hill would have to get around a provision of the 2008 bailout legislation that requires money that is paid back by banks or left over to be used exclusively for reducing the federal deficit.
With a tough election year coming up, Obama and congressional Democrats want badly to do something about jobs. Turning a highly unpopular financial rescue program, known as the Troubled Asset Relief Program (TARP), into a potentially popular one with new jobs attached has strong political appeal — although Republican critics have depicted such an approach as a backdoor way of putting a second economic stimulus package into force.
The administration now estimates that the TARP will cost about $200 billion less than the $341 billion the White House estimated in August.
The lower estimate reflects faster repayments by big banks and less spending on some of the rescue programs as the financial sector recovered from its freefall more quickly than anticipated.
"TARP has turned out to be much cheaper than we had expected, although not cheap," Obama told reporters at the White House. "It means that some of that money can be devoted to deficit reduction. And the question is: Are there selective approaches that are consistent with the original goals of TARP — for example, making sure that small businesses are still getting lending — that would be appropriate in accelerating job growth?"
"And I will be addressing that tomorrow," Obama said.
It was the clearest signal yet that the White House might be planning to argue that helping unlock credit for small businesses is in line with the original goals of the bank bailout bill and thus a valid expenditure of federal money — with more job creation a byproduct.
The bailout program, which had an initial price tag of $700 billion, was passed by Congress in October 2008 as the nation's financial system teetered on the brink of collapse. It was followed this year by a less narrowly focused $787 billion stimulus package sponsored by Obama and passed by Congress that includes funds for a wide variety of projects. While the TARP bailout was intended to calm markets, it has become for many people a symbol of a supposed government bias for Wall Street at the expense of Main Street. It has contributed to a widespread anti-Washington mood that is troubling to incumbents of both parties.
Many of the nation's largest Wall Street institutions have roared back to health with the government's helping hand, even as the rest of the economy continues to suffer and shed jobs.
Some congressional Democrats are looking at redirecting up to $70 billion from the bailout windfall for job-related and other purposes.
House Speaker Nancy Pelosi said last week that the House is eying a bill to pay for construction jobs, aid to strapped state and local governments, and help for small business "to be paid for" with unallocated bailout funds.
She said any jobs bill would be in addition to separate "safety net" legislation that would again extend unemployment benefits for the long-term jobless and renew health insurance subsidies for them. Only the safety net measure is likely to make it through Congress this year, senators say.
Republicans say using the TARP to pay for any jobs bill is simply a shell game to lend the impression that the action wouldn't add to the deficit.
New Hampshire Sen. Judd Gregg, the top Republican on the Senate Budget Committee, said Monday that the law explicitly blocks using the TARP for infrastructure or other nonfinancial industry projects.
"Everybody agreed that this money — as it came back in — was going to go back to reducing the deficit and the debt," said Gregg, who was one of the chief negotiators in writing the law. Gregg said that Democrats are eying "this money as some sort of a kitty, a slush fund to be used by the appropriators around here for the purposes of whatever the next stimulus exercise is going to be."
The White House had initially seemed cool to the notion of trying to redirect TARP money to jobs-related programs. But over the past few days, it has changed its tone.
White House spokesman Robert Gibbs on Monday denied GOP charges that using leftover bailout funds for spending projects would be tantamount to a second stimulus package in disguise.
"I think Republicans are just simply dead wrong," Gibbs said. He said the president and his White House economic team as well as lawmakers on Capitol Hill "are looking at these questions to see what are the important and necessary next steps."
Obama has been buoyed by recent reports showing the jobless rate declined to 10 percent in November from 10.2 percent in October, and that the economy grew by at a 2.8 percent rate in the July-September period after four quarters of decline.
"What my speech will focus on tomorrow is the fact that, having gotten the financial crisis under control ... our biggest challenge now is making sure that job growth matches up with economic growth," Obama said.
And he said one of the biggest remaining problems is that small businesses are still having a hard time getting loans.
"They cannot get the loans that they need to make capital investments that would allow them to then expand employment. And that's a particular area where we might be able to make a difference, "Obama said.
The new TARP estimates could reduce the administration's deficit forecast for the current budget year from $1.5 trillion to $1.3 trillion — assuming that all of the $200 billion windfall went exclusively toward deficit reduction and was all targeted for a single fiscal year.
The deficit for the fiscal year that ended Sept. 30 was a record $1.42 trillion