WASHINGTON — The Senate narrowly voted to defeat a proposal to immediately end the Treasury's financial market rescue plan as several moderate Democrats sided with the Republican minority in favor of the measure.
The proposal would have sought to wind down the Troubled Asset Relief Program, and require the Treasury to use any unspent funds to pay down the burgeoning federal government budget deficit.
The Senate vote was 53-45, a majority in favor of ending the Tarp, but short of the 60 votes required to carry the vote.
Democratic leadership opposed the amendment because they felt it would have handcuffed Treasury Secretary Timothy Geithner in his efforts to ensure the stability of the financial markets.
The Obama administration last week said it would recoup any taxpayer losses incurred as a result of the Wall Street bailout. It proposed a tax on financial institutions that would raise around $90 billion over the next decade to cover the costs of the Tarp.
Sen. Christopher Dodd (D., Ct.) argued against the amendment, saying the Tarp funds instead should be used to make loans to small businesses struggling to tap the commercial credit markets.
He said there is approximately $320 billion of unspent money in the Tarp that could at least be partly used to stimulate job growth in the private sector.
Republicans have argued the crisis facing financial firms has passed and the administration is trying to use the Tarp monies as a slush fund to dole out as it pleases.
Sen. John Thune (R., S.D.), the primary backer of the measure, has fought for a vote on ending the Tarp for several months.
Congress authorized the Treasury to spend up to $700 billion to stabilize the markets at the height of the market crisis in the fall of 2008.
The measure was the first vote of several aimed at reining in federal government spending that are expected over the next several days as the Senate deliberates a $1.9 trillion increase in the government's borrowing cap.
That hike would increase the total amount of debt the government can hold to $14.3 trillion, which Democrats believe would allow the government to borrow enough to pay its bills for the rest of the year. The current limit is $12.4 trillion.
The federal government recorded a budget deficit of $1.4 trillion in the last fiscal year, and is on track to post a higher deficit in the current fiscal year.
Republicans are also pushing for a freeze to discretionary spending for the next five years, and to cancel unspent money from last year's $787 billion economic stimulus plan.
Some senators are also pushing for the creation of a commission made up primarily of lawmakers to come up with ways to tackle the long-term fiscal challenges the country faces.
Its recommendations would likely include cuts to Medicare, Medicaid and social security benefits as well as tax increases.
It seems almost certain that there aren't sufficient votes for that plan. Instead, the Obama administration has proposed a commission created by the president's executive authority. Senators have opposed that, arguing that such a panel would lack the requisite authority to force Congress to hold a vote on the commission's findings.
Prior to the vote, Senate Republican aides had expressed hope that Tuesday's upset victory by Scott Brown in the special election for the vacant Massachusetts Senate seat might have convinced some Democratic lawmakers to vote for the measure.
In the end, 13 Democrats voted for ending the Tarp, most of them moderate members of the caucus.