How to spend $350 billion in 77 days

In two-and-a-half months, the Treasury has used up half of the money
from the Troubled Asset Relief Program. Here's how it came and went so
fast.

NEW YORK (CNNMoney.com) -- President Bush has grudgingly allowed
General Motors and Chrysler to drive away with the last few billion
bucks in Treasury's TARP till, which boasted $350 billion a mere 77
days ago.

How did it all slip away so fast?

The money pot -- intended to save the teetering financial system --
was formally proposed in a three-page missive that Treasury sent to
Congress on the morning of Saturday, Sept. 20.

Over the course of two weeks, lawmakers debated the potential moral,
ethical and financial hazards of handing over unprecedented power and
unprecedented sums of taxpayer money to the Treasury. Their responses
ranged from gobsmacked to apoplectic.

By Friday, Oct. 3, Congress had passed a 451-page bill that President
Bush signed into law within hours. The law granted Treasury up to $700
billion, half of which was made available right away.

Since then, Treasury has:

sent checks totaling $168 billion in varying amounts to 116 banks;
committed another $82 billion to capitalize more banks;
bought $40 billion in preferred shares of American International Group
(AIG, Fortune 500) so the troubled insurer could pay off an earlier
loan from the Federal Reserve;
committed $20 billion to back any losses that the Federal Reserve Bank
of New York might incur in a new program to lend money to owners of
securities backed by credit card debt, student loans, auto loans and
small business loans;
committed to invest $20 billion in Citigroup on top of $25 billion the
bank had already received;
committed $5 billion as a loan loss backstop to Citigroup;
agreed to loan $13.4 billion to GM and Chrysler to get them through
the next few months.
That next $350B? Maybe not yet, Hank
Now, it's likely that Treasury will ask for the second tranche of $350
billion.

"It's clear Congress will need to release the remainder of the TARP to
support financial market stability," Treasury Secretary Henry Paulson
said Friday. "I will discuss that process with the congressional
leadership and the president-elect's transition team in the near
future."

It's not clear, however, whether Paulson will formally ask Congress
for the second tranche of TARP money before turning over the keys of
the Treasury to his likely successor, Tim Geithner.

Even if Paulson wants to, however, he's likely to face an uphill
battle getting it.

"It seems very unlikely that Congress will give the final TARP
installment to the Bush administration," said Jaret Seiberg, a
financial services analyst at policy research firm Stanford Group.

That's because the apoplexy among those who originally opposed the
TARP or who voted for it reluctantly has grown and spread for several
reasons.

One cause of Capitol Hill's bailout rage: the Treasury has not used
TARP money to help prevent foreclosures. Democratic lawmakers, who
crafted the legislation and purposefully included language about
foreclosure prevention, beg to differ. They have said repeatedly they
will not release any more TARP money until the Treasury commits to use
some of it to help troubled homeowners.

Second, lawmakers are not happy Treasury has given so much capital to
banks without requiring them to lend more and do more to oversee how
the banks are using the money. Paulson has said Treasury told TARP
recipients that it expects them to lend. "But it's not practical or
prudent for the government to say 'make this loan, don't make that
loan,'" he said Thursday, speaking at an event in New York.

And third, Republicans in particular resent what they see as TARP
mission creep. House Minority Leader John Boehner, R-Ohio, was one of
many who opposed the auto bailout, and the fact that TARP was the
source of the bridge loans in particular.

"The use of TARP funds is also regrettable, the latest in a growing
list of TARP money uses that were not discussed with or envisioned by
Congress when the program was authorized," Boehner said Friday.

House Speaker Nancy Pelosi, D-Calif., has said she is working on a
bill to add more guarantees that future TARP funds be used to prevent
foreclosures and protect taxpayers. But it's not clear yet how much
Democratic support that will get. And there is near total Republican
opposition in the House to approve any more TARP funding.

If that remains the case, the Obama team will have to add yet another
entry to its ever-growing to-do list when they take power on Jan. 20.

- CNN congressional producer Deirdre Walsh contributed to this report.

First Published: December 19, 2008: 4:13 PM ET

http://money.cnn.com/2008/12/19/news/economy/tarp_tale_of_first350b/index.htm?postversion=2008121916