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.

1 comment:

  1. Does it matter? I don't believe there is a cap on TARP. They can just sell some of the existing portfolio (at a loss, naturally) and buy more trash. Check out how the bill was written. It says authority to purchase is limited to "outstanding at any one time." He can keep buying as long as he doesn't have too full a portfolio!

    (a) Authority.—
    The authority of the Secretary to purchase troubled assets under this Act shall be limited as follows:
    (1) Effective upon the date of enactment of this Act, such authority shall be limited to $250,000,000,000 outstanding at any one time.
    (2) If at any time, the President submits to the Congress a written certification that the Secretary needs to exercise the authority under this paragraph, effective upon such submission, such authority shall be limited to $350,000,000,000 outstanding at any one time.
    (3) If, at any time after the certification in paragraph (2) has been made, the President transmits to the Congress a written report detailing the plan of the Secretary to exercise the authority under this paragraph, unless there is enacted, within 15 calendar days of such transmission, a joint resolution described in subsection (c), effective upon the expiration of such 15-day period, such authority shall be limited to $700,000,000,000 outstanding at any one time.
    (b) Aggregation of Purchase Prices.—
    The amount of troubled assets purchased by the Secretary outstanding at any one time shall be determined for purposes of the dollar amount limitations under subsection (a) by aggregating the purchase prices of all troubled assets held.