As the Troubled Asset Relief Program morphs into an effort to inject
some of the $700 billion directly into distressed financial
institutions (even if that's not exactly what Congress thought it was
authorizing), Treasury Secretary Hank Paulson hasn't given up on the
original TARP, and has found a new use for Fannie Mae and Freddie Mac.
It's so great to own nearly everything.
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Although the takeover and management of Fannie and Freddie are
technically outside of the purview of TARP, the Bush administration has
ordered them to buy $40 billion of underperforming mortgage bonds a
month, according to Bloomberg.
If you do the math, that's an additional $480 billion a year on top of
the TARP's $700 billion in funding -- assuming Paulson's successor
continues the plan after Jan. 20. Even if the next administration
cancels those efforts, the plan will cost an additional $160 billion
outside of TARP.
If that's making you feel queasy, just take solace in the fact that
Paulson originally planned to spend $50 billion a month. - Matthew Wurtzel
See story from Bloomberg
See related cover story "Remember the bailout" from The Deal newsweekly
Matthew Wurtzel is the editor of Dealscape.
