WASHINGTON — With the announcement of its $6 billion investment to stabilize GMAC, the Treasury Department has now spent or committed more money than Congress has allocated to its financial-rescue program, effectively making more promises than it can afford to keep.
The scorecard: Congress gave Treasury $350 billion; Treasury has allocated $354.4 billion.
The department acknowledges that it needs Congress to approve the second half of the $700 billion rescue package simply to meet its commitments, let alone address new emergencies. If Congress blocks the additional funding, as some members say they want to do, Treasury could be forced to break promises.
The situation gives increased leverage to those in Congress demanding concessions from Treasury, including greater transparency, restrictions on the use of the money and an ironclad guarantee that a significant portion is spent to reduce foreclosure.
“Here’s Congress’ opportunity to do the right thing,” said Danielle Brian, executive director of the nonprofit Project on Government Oversight. “Now the opportunity is before them to ensure that there is some level of scrutiny and reasonable limitations on how the money is spent.”
Treasury announced in November that it would invest $250 billion in financial institutions. So far Treasury has invested $162.4 billion from that pot. The department has pledged at least another $30 billion to specific companies, according to a tally by investment bank Keefe, Bruyette & Woods. The rest of the money has not yet been promised to specific banks.
GMAC’s investment is not part of that $250 billion program, and Treasury officials say the size of that program has not been reduced.
But it could be reduced if Congress declines to provide more money.
Treasury Secretary Henry Paulson has called on Congress to release the second installment of funding for the rescue program, although Treasury officials have not approached congressional leaders to request that funding, according to people familiar with the situation. Once Treasury submits a formal request, the money will be allocated by default unless Congress votes to prevent it.
The government previously committed some money from the second $350 billion as part of the aid package announced Dec. 19 for automakers General Motors and Chrysler. The Bush administration extended $13.4 billion in immediate loans from the first half of the rescue package and promised another $4 billion in loans from the second half of the package. But the $4 billion is conditional on Congress approving the second half of the rescue package.
