TARP funds are unlikely to be fully repaid, program’s watchdog says

It’s ‘extremely unlikely’ that taxpayers will see a full return on their
investment, Neil Barofsky, special inspector general for the Troubled
Asset Relief Program, tells the Senate Banking Committee.

By Alexander C. Hart
September 25, 2009
Reporting from Washington

The Treasury is unlikely to get back the full amount of money lent under the Troubled Asset Relief Program despite a recent spate of repayments from large banks, warned the program’s watchdog.

The program “played a significant role” in rescuing the financial system from a meltdown, Neil Barofsky, special inspector general for TARP, testified before the Senate Banking Committee on Thursday. But it was “extremely unlikely that the taxpayer will see a full return on its TARP investment,” according to his prepared testimony.

Losing some money was almost inevitable, said William Goetzmann, a finance professor at the Yale School of Management. “The intent of TARP investment was not that it was a great investment for the U.S. taxpayer,” Goetzmann said. “The intent was to save the U.S. financial system, and that was going to cost some money.”

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Climate Change Discussion Heats Up Part 1: H.R. 1862

Today, we start taking a look at Congressional approaches to combating climate change.

At the moment, most of the work is being done in the House of Representatives, where there are two major bills.

The first is sponsored by Democratic Congressional Campaign Committee Chairman Chris Van Hollen (D-Md.). 

Van Hollen recently annoyed some senior Democrats by publicly saying he wanted to proceed cautiously on climate-change legislation if it appeared the Senate would not take it up. He wants to avoid forcing freshman Representatives to take a stand on the highly controversial issue unless he is confident the effort to regulate greenhouse gases will not fizzle out.

The second is sponsored by House Energy and Commerce Committee Chairman Henry Waxman  (D-Calif.) and the committee's Subcommittee on Energy and the Environment Chairman Ed Markey (D-Mass.). The bill has not been formally introduced, but a discussion draft is available on the committee's Web site. Analysis will come later this week.

After the jump, we take a look at Van Hollen's bill.

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Senate Budget Mania

UPDATE 11:43. Senate passes budget 55-43.

The Senate had its hands full today as it continued consideration of the budget. Today was a "vote-a-rama," a quirky part of the budget process where Senators are allowed to propose amendments unfettered. 

As of early this evening, more than 200 had been submitted. Senators frequently demanded roll call votes, which led Sen. Kent Conrad (D-N.D.) to comment that if roll call votes were demanded for all amendments, they would be there for more than a day just to vote on them all.

But as of this post, 82 amendments were approved after a combination of unanimous consent agreements and votes. 

Most of these amendments are political posturing. Since the budget resolution is non-binding, almost all of these amendments have no practical effect. Even if they did, the House's procedure for consideration of the budget will strip out the Senate version and replace it with the version the House passes. Any changes from the House resolution will thus occur in conference committee.

Meaningless or not, here is a quick pick of three important (or interesting) amendments passed today:

1. This one is actually a pair, S.AMDT 873 (from Sen. Jon Kyl (R-Ariz.)) and S.AMDT 974, from Sen. Dick Durbin (D-Ill.). Kyl's amendment raised the estate tax exemption to $5 million and lowers the tax rate to 35 percent. Durbin's amendment bans any legislation that has an estate-tax rate below 45 percent. The two have almost exactly opposite effects. The amendments passed 51-48 and 56-43, respectively.

2. S. AMDT 910, proposed by Sen. Lindsey Graham (R-S.C.), prohibits legislation that includes a national energy tax that would affect the middle class. According to the amendment, "The term  `National energy tax increase'' means any legislation that the Congressional Budget Office would score as leading to an increase in the costs of producing, generating or consuming energy." This amendment passed 65-33.

3. S. AMDT 803, sponsored by Republican Sen. John Thune of South Dakota, requires a 60-vote threshold for legislation that would increase revenues raised by lowering the deduction for charitable giving. The Senate version of the budget contains no such provisions, but it did not impede the measure on its way to passing 94-3.

The House passed their version of the budget earlier this evening — 233-196, with all Republicans and 20 Democrats voting no. As of this post, the Senate has three amendments to consider and will then vote on final passage.

Toward a Smarter Tax Policy: Other Approaches to Deduction Reform

At a press conference last night, President Obama firmly restated his support for limiting mortgage interest deductability as well as the deductability of charitable giving. It is interesting to see, because even some Democrats are opposed to the plans.

Under current law, those in the 35 percent bracket reduce their taxes by 35 cents for each dollar they give to charity or pay in mortgage interest. Obama's budget proposal, which is currently wending through Congress, would lower the value of the deduction to 28 cents per dollar donated. 

People paying less tax rates lower than 28 percent would be unaffected.

But is it really the best way forward? Both deductions are well-established (the mortgage-interest deduction dates to 1913, the year the income tax was imposed), and many seem loath to surrender them. 

It is important to consider the deductions' goals, which seem straightforward enough: encourage homeownership and giving money to charity.

That seems simple enough, right? But as always, the devil is in the details, which are after the jump.

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