FIRST, JUST FORGET all the problems that the $700,000,000,000 Wall Street bailout has had before it's even in place: AIG's $400,000 spa retreat, the bonuses to be paid out of bailout money, the dividends to be paid out of bailout money, the secret 'compensation' deals given to the 'contractors' who have been hired as brokers to do the government's bailout work in the spirit of privatization, the rush by everybody and and their sister to become 'banks' so as to get in on the booty.
Forget all that, and just concentrate on this:
Treasury Secretary Henry M. Paulson Jr. announced a major shift in the thrust of the $700 billion financial-rescue program on Wednesday...
Mr. Paulson said the $700 billion would not be used to buy up troubled mortgage-related securities, as the rescue effort was originally conceived, but will instead be used in a broader campaign to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers seeking car loans, student loans and other kinds of borrowing.
That's right. The money that was needed now to buy 'toxic assets' or else the world would see an economic collapse or worse is now... no longer needed.
And the plan that had to be passed now so that there was no time for testimony on whether it would work or if there might be much better alternatives is... no longer in effect.
But curiously, the $700,000,000,000 remains in Paulson's hands.
Bait, meet switch. Hands, meet ankles. It is as we said it was.
Many new supplicants are lining up for an infusion of capital as billions of dollars are channeled to other beneficiaries like the American International Group, and possibly soon American Express.
Of the initial $350 billion that Congress freed up, out of the $700 billion in bailout money contained in the law that passed last month, the Treasury Department has committed all but $60 billion...
"By the time they get to the community banks, there may not be enough money left," said Edward L. Yingling, the president of the American Bankers Association. "The marketplace is looking at this so rapidly that those who have the money first may have some advantage."...
Then there is the National Marine Manufacturers Association, which is asking whether boat financing companies might be eligible for aid to ensure that dealers have access to credit to stock their showrooms with boats — costs have gone up as the credit markets have calcified. Using much the same rationale, the National Automobile Dealers Association is pleading that car dealers get consideration, too....
The Congressional bailout law gave the Treasury broad authority to decide how to spend the $700 billion. Under the terms of the $250 billion capital purchase program announced last month, cash infusions are available to "qualifying U.S. banks, savings associations, and certain bank and savings and loan holding companies, engaged only in financial activities."
That definition has grown to include private banks and insurers like Allstate and MetLife, which own savings and loans. It may also encompass industrial lenders like GE Capital and GMAC, the financing arm of General Motors, provided they win approval to reclassify themselves as a bank or savings and loan holding company.
Pigs, meet trough.