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To: Johnny Canuck who wrote (45191)	12/5/2008 10:46:53 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71993

Wall Street Crisis TARP Stretched Thin Brian Wingfield and Liz Moyer, 11.10.08, 02:15 PM EST With bank's wolfing down bailout money and automakers joining the line, the question becomes, Is $700 billion enough? As more financial firms draw down bailout assistance from the U.S. government--and more banks and automakers get in line--the $700 billion Uncle Sam has set aside in rescue funds might not be enough. Embattled insurance company American International Group (nyse: AIG - news - people ) got the newest slice of the pie Monday when the Treasury Department said it would buy $40 billion worth of preferred shares in the firm. An additional $250 billion has been set aside for Treasury to buy shares in other companies, mainly banks. That leaves the government with $410 billion still to be spoken for, but Treasury is spending its cash quickly. Article Controls email print reprint newsletter comments share Yahoo! Buzz So far, eight large U.S. banks have taken half of the first $250 billion; of this amount, another 44 banks have asked for a combined $47 billion. There are potentially hundreds of other banks lining up to file applications for the remaining $78 billion. Speaking at a news conference Monday, Assistant Treasury Secretary Neel Kashkari said the program is ample enough for all qualifying applicants. Well, perhaps. But with insurance companies and U.S. automakers also seeking government aid, it remains unclear when or how the government will tap into its remaining funds. For now, at least, the agency is "comfortable with the requested amount" of $700 billion, says Treasury spokeswoman Jennifer Zuccarelli in an e-mail. What's not known is whether the administration will spend the lot by the end of the year--or whether any monies will be left for the next administration to dole out as it sees fit. Related QuotesAIG $1.94 +0.10 GM $4.08 -0.03 F $2.72 +0.06 Get Quotes: "We will announce our need for funding as it arises," Zuccarelli says. Officials from President-elect Barack Obama's office did not return a request for comment. As part of the bailout bill passed in October, Congress set up the "Troubled Assets Relief Program," also known as the TARP, which gives the Treasury secretary broad authority "to purchase, and to make and fund commitments to purchase troubled assets from any financial institution." Congress gave Treasury $250 billion immediately, and President Bush requested an additional $100 billion. The remaining $350 billion comes with strings attached: The president can ask for the balance, but Congress has the right to say no. Comment On This Story In its bailout of the financial system, Treasury made the first $250 billion--known as the Capital Purchase Program--available to banks, savings associations and certain bank and savings and loan holding companies. The deadline for publicly traded banks to apply for the program is Friday, though Treasury is extending the deadline for private banks to apply. Related Stories Monday Surge On Wall Street Has Chinese Roots Mundane Monday On The Street Uncle Sam Pumps Up Citi Uncle Sam Pumps Up Citi Street Slinks Toward Close Stories Videos The $40 billion being used to purchase AIG stock comes from the $100 billion requested by President Bush several weeks ago. Treasury's Kashkari says this purchase is a one-off deal and not part of a new plan. "The TARP's foremost purpose is to stabilize the financial system," he says. "This action was necessary to maintain the stability of our financial system." In return, AIG has to comply with strict limits on executive compensation, corporate expenses and lobbying. It's also an indication that Treasury is using its money to help both beleaguered firms as well as healthy ones. Treasury Secretary Henry Paulson has portrayed the Capital Purchase Plan as a means to help healthy banks recapitalize so they could lend again and pump liquidity through the financial markets. But AIG is an ailing insurer, which lost more than $24 billion in the most recent quarter, and it certainly doesn't seem to be in a position to lend money. Dugg on Forbes.com Forest Gumption - Forbes.com What Would Keynes Do? - Forbes.com Run, Jeb, Run - Forbes.com In Pictures: 10 Cool Wii Games Visit The Forbes.com Digg Channel Moreover, there are many troubled firms that want the government's aid. In September, Congress authorized automakers to receive a separate $25 billion in loans to pay for investments in energy-saving vehicles. However, with the Energy Department still considering how these loans are to be made available, automakers are looking for other government resources. Detroit is now looking for an additional $25 billion in emergency loans to help General Motors (nyse: GM - news - people ), Ford Motor (nyse: F - news - people ) and Chrysler from going under. If Uncle Sam is to give Detroit another lift, it possibly could come through a fiscal stimulus package that Congress is now considering. Separate from the bailout, the stimulus package would likely allocate as much as $100 billion on infrastructure investments, aid to states and other broad measures. If Congress takes that route, it might be a good thing for the TARP. With nearly $300 billion already spoken for, Treasury's only choice is to spend the rest wisely.