Friday, January 16, 2009

The benefits of the Ponzi principle

In this story in today's Wall Street Journal, the people over at the US Treasury department seem to be borrowing heavily from Bernie Madoff's book of finance.

They've decided, those experts over at the Fed, that Bank of America desperately needs billions in federal money to beef up its capital and to fund a guarantee program to limit BofA's future losses.

There's just one catch (to quote Joseph Heller) - the TARP money is all accounted for.

But no problem - the Senate just approved the next round of federal funds - so they'll give BofA money that already has been allocated to other financial institutions - and we'll just make a note that billions of the new funds have already been spent.

Not clear how turning TARP into a Ponzi scheme is going to benefit the economy in the long run. Not clear how tossing money into a clogged system will rescue it. Not clear how TARP is benefiting the nation at all.

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