TARP - a perfect acronym

The Dow Jones Industrial Average is off by several hundred points again today as investors wait on news from Washington on the bailout plan. At the Fresh Produce Industry Discussion Group this morning, Luis posts this story from The Telegraph in the UK that describes the bailout effort.

At least Washington's Troubled Assets Relief Program to help struggling banks and save us all from ruin has been blessed with the perfect acronym; as TARP, it does indeed resemble an enormous canvas sheet thrown over a whole load of problems which we'll weigh down with tyres and leave to fester at the bottom of the yard.

TK: What did I read on Drudge the other day? Failure to pass the package could result in the broader stock market losing 25% of its value? Put in those terms, the bailout has to pass. By the way, check out this Youtube video on failed earlier attempts to reign in Fannie Mae and Freddie Mac. Go here for the CBO report on the bailout effort. From that report, the very large costs and the hopeful (doubtful) upside to the deal:

CBO expects that the Treasury would use most or all of the $700 billion in purchase authority within two years (after which the authority to enter into agreements to purchase various troubled assets would expire). To finance those purchases, the Treasury would have to sell debt to the public. Federal debt held by the public would therefore rise by about $700 billion, although the government would also acquire valuable financial assets in the process. As noted above, CBO expects that since the acquired assets would have some value, the net budget impact would be substantially less than $700 billion; similarly, net cash disbursements under the program would also be substantially less than $700 billion over time because, ultimately, the government would sell the acquired assets and thus generate income that would offset much of the initial expenditures.