WATCH: Bennet deficit-reduction TARP proposal accepted by Senate

Last night, the Senate agreed to a proposal by Democratic Colorado Sen. Michael Bennet to reduce funds available for the Troubled Asset Relief Program or TARP, trimming it back substantially from $700 billion to $550 billion. Bennet’s amendment to Connecticut Sen. Chris Dodd’s financial regulatory reform proposal also requires bailout funds repaid by Wall Street firms and automakers to go towards reducing the deficit — not to pay for job creation programs, as some Democrats had hoped.

Bennet making his case:

TARP currently allows the Treasurey to keep $700 billion “outstanding” at any one time… The Treasury has already received about $180 billion in repaid funds from banks that are now in a position to repay the taxpayers. But right now Treasury can turn around and lend that money to some other financial institution. It can use our money again and again and again. And since the TARP money is borrowed against our kids and grandkids’ futures, that’s really using their money again and again and again. I can tell you for sure, Mr President, that my daughters don’t want to be stuck footing the bill for keeping the TARP around even one day longer than we have to. By supporting my amendment this body can move forcefully toward ending the TARP and restoring fiscal sanity.

The TARP program has never dispensed (pdf) all of its funds — giving a total of $383 billion to big banks and auto firms, $187 billion of which has been paid back. Leaving the cap at $550 billion allows the administration some wiggle room to aid ailing banks if, for instance, housing double-dips. The government expects to ultimately break even on the program.

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