TARP

Troubled Asset Relief Program (TARP) the U.S. government bailout plan presented by Treasury Secretary Paulsen and agreed to by Congress, authorized $700 billion to bolster the economy in general and bail out certain financial institutions in particular.

Now largely viewed as a failed plan, the initial plan was to buy $700 billion in toxic securities—spoilage from defaulted home mortgages that kicked off the financial meltdown. But the toxic-loan plan never got off the ground.  It couldn’t move far or fast enough to bring the immediate relief Paulson promised.

Instead, Treasury announced it had devised a new plan aimed at thawing out the frozen credit markets.  The new plan: Put money directly into big banks by enacting a little-known clause in Sec. 113, (e )(1) of the TARP legislation, which economists are calling the “Stock Injection Alternative.”

Then after the first $350 billion had been released, Paulson unexpectedly switched gears into what some believed was too broad and too vague a direction. Paulson announced he wanted to extend the bailout program to non-bank credit markets like those holding credit card receivables, auto loans and student loans. American Express has, with a sprinkle of Treasury pixie dust, been deemed a bank, thus qualified to feed at the trough with the others.  Companies like GMAC, the lending arm of General Motors, and other carmakers’ lending units, are standing in line as well.

Continue to check back at www.financialspeculation.com for updates on the TARP situation.