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Wednesday, December 09, 2009 4:51 PM

TARP Extended, Now a "Petty Cash Drawer for Politically Favored Interests"

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Drunken fools and slush funds have one thing in common. No one ever acts to cut them off. Thus, it should be no surprise Treasury Extends TARP.

Facing opposition from Republican lawmakers, the Obama administration is extending its $700 billion financial-rescue program until next October, as expected, Treasury Secretary Timothy Geithner said Wednesday.

The Troubled Asset Relief Program, which has been a lightning rod for criticism that the government aided Wall Street while ignoring Main Street, had been set to expire Dec. 31. As of Dec. 9, the Treasury had roughly $309.5 billion in TARP funds available for new commitments and programs.

Some funds may be used to increase Treasury's contribution to the Term Asset-Backed Securities Loan Facility. Based on the statute that created TARP, the Obama administration would need Congress to approve any further extension of the use of TARP funds.
Mish: Approval?
Since when does the Treasury or the Fed ask for approval?
President Obama said Wednesday the extension is really a "winding down" with a changed focus on troubled homeowners, small banks and small businesses.
Mish: It's an extension, we just don't want to call it that.
Obama added that the TARP program has served its original purpose of stemming the financial crisis, cost less than expected, and given government officials a chance to reduce the deficit faster.
GOP lawmakers have sought to block the extension, arguing that that the White House's plans to use TARP to fund more government spending violates the intent of the law and adds to America's debt burden.

"TARP was supposed to be a temporary plan to restore the health of the credit markets and protect the economy from a 'doomsday' scenario," said Rep. Spencer Bachus, R-Ala., the ranking member on the House Financial Services Committee. "Instead, the Obama administration is turning TARP into a permanent bailout agency and petty cash drawer for politically favored interests."
Mish: The original purpose was met so we are going to use the money for a slush fund instead. Does the law allow that? Excuse me, I almost forgot ....
Since when does the Treasury or the Fed ask for approval?
According to Geithner's letter to Congress, Treasury does not expect to deploy more than $550 billion of the funds.
Mish: I see "petty cash" has taken on quite a different meaning these days. One thing is for sure, $500 billion is not what it used to be. Then again $550 billion is only the expectation. Who knows what will really be spent, or for what, or under what conditions?

Mike "Mish" Shedlock
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