What is TARP?
TARP is the latest and greatest, new and improved bailout package being thrown out by the almighty (read: Hank Paulson and Friends inc.). Tarps in the real world cover things up, be it dead leaves, dead bodies, holes. Insert your favorite thing that you would want to hide and that is exactly what this plan does. in this case TARP helps fill in holes on Wall Street balance sheets. The holes is in this case are the mark to market difference between where many poorly performing securities are currently marked and where they could really be sold. Merrill Lynch and E-Trade recently sold large chunks of CDOs at 20 cents on the dollar proving that there are buyers at a certain price. Most other banks prefer to hold identical securities at 40-80 cents despite market clearing levels being known. Bazooka Hank has figured out a way for the banks to avoid these further writedowns and potential bankruptcies. Let the tax payer pay for it. Its pretty simple. Create a trust that will buy loans, without any government oversight, at 50-60 cents on the dollar. Hold these loans and then re-sell them back to Wall Street at 20-30 cents on the dollar, that is assuming the securities haven't gone bankrupt. Pretty simple plan except that congress needs to approve and hopefully given their approvals of homeland security measures and the Iraq war they have learned their lesson about being scared into bogus approvals.
