Tuesday, January 06, 2009

What Citi Got for Christmas: Its Very Own TARP Program

I’ve never set foot in a Build-A-Bear-Workshop, and I fervently hope I never will. But I'm trying to keep up with the activities at Hank Paulson's Build-A-Bailout Workshop.

Every time we look up, Mr. Paulson has adorned his bailout with a new frill or furbelow. His latest flourish, announced on January 2, is called the “Targeted Investment Program.” In its press release, Treasury explained that this was the program “under which the Citigroup investment that was announced on Nov. 23 was made.” An odd statement, since no such program existed back then.

In fact, as late as last week, the Targeted Investment Program failed to make an appearance in Treasury's December 30 response letter to the Congressional Oversight Panel, which proudly outlined 19 other bailout programs and initiatives.

Before the January 2 press release, as I pointed out in this post, there were only two publicly announced programs that could have covered Citi’s November handout: the Capital Purchase Program (CPP) or the Systemically Significant Failing Institutions Program (SSFI), otherwise known as AIG-Land.

Turns out there was, as Bill Clinton used to say, a Third Way: Mr. Paulson injected more cash into Citigroup, then invented the Targeted Investment Program (TIP) to explain what he'd done. Funny, the Treasury's official description of the TIP looks an awful lot like its official description of the SSFI. But the TIP is broader; it lets Treasury come to the rescue when there’s a “loss of confidence” in an institution and the markets are freaking out, while the SSFI requires the threat of an institution's “disorderly failure.”

Gee, if all it takes to get bailed out is for people to lose confidence in you, Mr. Paulson could be bailing himself out any day now.

Note: I've corrected this post. An earlier version said that Treasury's response letter to the Congressional Oversight Panel listed all the programs in effect under the TARP. Actually, Treasury just said it was listing "many of the actions" it had taken. My mistake aside, the letter's failure to mention either the TIP or the huge Citi bailout is just plain weird.

Image source: PR Newswire

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