Paulson's Piggy Bank Running Low

ABC News' Charles Herman reports: Could the $700 billion TARP funds be used to help the auto industry?  The White House is not in favor of that idea.

Another question:  Is there $34 billion left in the first batch of funds provided to the Treasury Department? On the surface, no.

Since October, Treasury Secretary Henry Paulson has had at his disposal $350 billion, half of the total TARP funds.  To date, he has used or committed $330 billion of those funds.

  • $250 billion available to financial institutions.  As of 11/25/08, $161.5 billion has been provided to 53 institutions.
  • $40 billion for AIG.  AIG received the money on 11/25/08.
  • $20 billion in additional funds for Citigroup announced last week.
  • $20 billion for the creation of a “consumer asset backed securities market established by the Federal Reserve Bank of New York.”

That leaves a $20 billion hole for a $34 billion peg. 

To make funds available to the auto industry, Paulson could take some money from the “financial institutions” pot, but the impact on financial institutions, the credit market and the stock market if less money is available is unclear. 

Requesting the remaining $350 billion of the $700 billion TARP funds could be tricky.  Paulson has indicated that he is not inclined to draw down those funds.  Then again, that might change if the Treasury Department decides it needs money to fund a program to reduce interest rates.  And Congress might not be inclined to let him have the money.

For Paulson to receive the remaining half of the TARP funds, the president would have to provide written notice to Congress that the treasury secretary needs the money.  Unless Congress issues a joint resolution of disapproval within 15 days of receiving that notice, the money will be his to spend.

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