Just a month ago, $700 billion sounded like a lot of money.
Not anymore. Half the money is spent, and while it’s hard to prove that cash has not helped to avoid a much more serious situation, say, the closure of thousands of banks, it’s equally hard to keep corporate lobbyists from crashing the gates at Treasury for a shot at what’s left.
Worse still, it seems very likely that the incoming Obama administration will be forced to either expand the program or tack on a new one as automakers, credit card companies, regional banks, and insurers — even auto dealers and boat sellers — line up, hat in hand.
Treasury is now down to $60 billion of the first $350 billion committed by the president. Treasury Secretary Hank Paulson would have to go back to Congress for the second half.
And that’s where the lobbyists come in.
“By the time they get to the community banks, there may not be enough money left,” Edward L. Yingling, president of the American Bankers Association, told The New York Times.
“The marketplace is looking at this so rapidly that those who have the money first may have some advantage.” Banks have until Friday to apply for what’s left.
Nevertheless, a Treasury official told the newspaper that it does not expect to ask Congress for the second half when it convenes next week. The Treasury’s liaison to business, Jeb Mason, told the Times that government would not be “picking winners and losers.”
Perhaps the most controversial funding so far has been to insurance giant AIG, which the media has typed as “zombie” company that isn’t really functioning at all and now depends on taxpayer cash to exist.
Taxpayers are “keeping the zombie alive,” Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors, told Bloomberg News.
“We keep getting deeper and deeper into these holes.”
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