Monday, March 30, 2009

TARP Running Dry

First the WSJ details:

The U.S. Treasury Department said it expects to have about $134.5 billion left in its financial-rescue fund, giving the Obama administration a cushion as it implements a range of expensive programs aimed at unlocking the credit market and boosting ailing industries.
If you think $134.5 billion left sounds like the well is running dry, then take a look at what Keith Hennessey (former director of the National Economic Council) believes that figure is closer to:
When President Obama took office, $387 B of the $700 B of available TARP funds had already been publicly committed. Here’s the breakdown.

This meant that the Obama team had $313 B left to commit before reaching the $700 B limit.
Since January 20th, Keith estimates that the Obama administration has committed as much as an additional $280.

If this is correct, we have less than $35 billion remaining in the TARP. Back to Keith:

There’s some uncertainty around the $80 B figure to further expand TALF, because the Administration has been ambiguous about how big the new TALF would be in total. I’ll bet they’re scrambling this week trying to figure out what they actually meant.

They can create some wiggle room for themselves if they say that the $15 B for small businesses and the $5 B for auto parts suppliers are a subset of the $100 B (in total) for “consumer credit.” This uncertainty and ambiguity should not obscure the critical point: they’re almost out of money.