Friday, November 14, 2008

FDIC-Treasury Squabble

In an interesting display of interdeparmental politics, Sheila Blair who heads the FDIC has pushed forward with a proposal to use $24B of the $700B TARP bailout money to assist with mortgage loan modifications. This is 3% of money that was earmarked for Wall Street, and even that amount Paulson and the Bush administration is raising objections to.

It's becoming more obtrusively clear that the money was only intended to be a taxpayer bailout of the rich and powerful.

UPDATE [11/18/08]: This is almost a new post, but in questioning today by the House Financial Services Committee, Paulson reiterated that it was not his intention to use the $700B TARP bailout money to assist specifically with mortgages, and he does not plan to bail out the auto industry either. Interestingly, he added that he only intends to use $350B of it; the rest would be for the Obama administration. (Recall that $250B was allocated for the immediate use by the Treasury Department, then another $100B additional merely required approval from the President, then the last $350B require approval from Congress.) He added that it is his belief that the government would recoup the expenditure (having been used to purchase preferred stock in banks). If history bears this out then my opinion of him and the bailout would improve somewhat.

UPDATE [2/7/09]: ...but I guess not. This preferred stock has recently been valued at 60 cents on the dollar at purchase time, which adds up to $78B of tax money given to support failed businesses with excessive executive compensation. No surprises there—to my mind this has always been $700B down the drain regardless.

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