Treasury Already Overextended On TARP Allocations

WASHINGTON–With the Treasury Department's announcement late Monday that it will provide $6 billion in support to GMAC LLC, the agency has officially allocated more money than it actually has on hand in the Troubled Asset Relief Program.Of the $350 billion it has received from Congress, the Treasury has pledged $358.4 billion, leaving observers and industry participants confused about how the agency can allocate money it does not have. By law, the Treasury must request the remaining $350 billion authorized by Congress for Tarp and give the legislators 15 days to object, but it has not yet made the request."It's like when they overbook airlines … ; if everyone shows up, there aren't enough seats. That sounds like what they did, and that's not good," said Kip Weissman, a partner in Luse Gorman, a Washington law firm.The Treasury defends its move by distinguishing between funds that have been committed and how much has actually been disbursed. Of the $350 billion Congress initially gave it, $217 billion has been deployed, leaving it flexibility to continue pledging money for other purposes."In the very short term, the allocated but not yet disbursed Tarp balances, in conjunction with the powers of the Federal Reserve and the FDIC, give me confidence that we have the necessary resources to address a significant financial market event," Treasury Secretary Henry Paulson said on Dec. 19.In a conference call late Monday, a Treasury official dismissed suggestions that Tarp was now essentially in deficit. Instead, he said, on a short-term, cash-flow basis, the agency has not exceeded the first $350 billion tranche so that it is "not fair to say we've overcommitted." –Cheyenee Hopkins