House Speaker Nancy Pelosi said Thursday that unused money from the Treasury Department's financial rescue plan would be used to pay for a job-creation package.
The California Democrat said that she favors using funds from the Troubled Asset Relief Program to fund initiatives to try to jump-start employment growth. In doing so, she effectively ruled out a tax on financial transactions by banks and other financial institutions.
Pelosi said she still favors such a tax in principle but that the United States would have to work with other countries to administer such a levy.
So far, financial institutions have repaid about $71 billion of the taxpayer money given them by the Treasury. This does not include the $45 billion that Bank of America Corp. said Wednesday it would begin repaying.
About $226.5 billion of the $700 billion appropriated last year either was never used by the Treasury or has been earmarked for initiatives but not yet spent.
A senior aide to Pelosi said that no decision had been made as to which pot of money to use, nor how big the final job creation package would be. House Democrats are talking to their counterparts in the Senate as well as in the Obama administration, he said.
Lawmakers are aware that, though they want to spur job creation, they do not want to enlarge the federal government's deficit.
Were they to use unspent Tarp funds for the job package, it would not add to the deficit, according to complicated budgetary rules. If repaid Tarp money were used, however, the deficit would swell.
Another potential wrinkle is that the administration has announced plans to use a portion of the Tarp funds to supply liquidity to regional and community banks in a bid to increase the capital available to small businesses.