There’s only $60 billion left of the first $350 billion tranche of what was once known as the Trash Asset Removal Plan (and is now known as the only pot of available money in the world). So many companies of all shapes, sizes, and flavours are demanding cash that Treasury can barely process the requests.
Congress will presumably order the Treasury to immediately begin doling out the second $350 billion, which, a few months ago, was seen as a sort of “just in case” reserve fund. No more.
In addition to the nine banks that got $125 billion shoved down their throats, the TARP has gone to a crowd of smaller banks and AIG, which just gulped down another $40 billion. Next up is Fannie Mae, which lost $29 billion yesterday, and General Motors and Ford, which are running on fumes.
WSJ: The rescue efforts are “evolving in ways that I don’t think anyone anticipated,” said Camden Fine, president and CEO of the Independent Community Bankers of America, a trade group. “Things are just hitting them from every single direction, every day, and I don’t think they know whether to spit or go blind.”
Meanwhile, when Hank Paulson goes hat in hand to Congress to ask them to approve the next $350 billion, he’ll likely get the Greenspan treatment:
The Treasury secretary is likely to face a hostile reception from lawmakers angry over Treasury’s reluctance to aid the auto industry as well as its decision not to force banks receiving government assistance to lend out those funds to consumers and small businesses.
And that’s only the beginning of what Congress is angry about. Remember how a key part of the TARP’s success was going to be a Darwinian survival of the fittest, in which the Treasury gave money only to the strongest banks and let the weak ones die? Well, that’s backasswards, says Sen. Schumer:
Sen. Charles Schumer of New York said lawmakers want Treasury to put in place new requirements to encourage lending and to focus the program on struggling, not healthy, institutions. Mr. Schumer also wants Treasury to widen the scope of the program to include a greater variety of financial firms.
Get ready for TARP II.
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