The $700 billion bailout is known as TARP, or Troubled Asset Relief Program.  The Treasury has distributed these TARP funds to troubled financial corporations and banks such as Fannie Mae, Citigroup, etc. in an effort to prevent a complete avalanche of financial failings.  Roughly half of the funds are still not earmarked as the Treasury must decide what next to “rescue,” whether it be the auto industry, swallow up the other banks’ bad assets, or another approach.

The economic stimulus being promoted by Barack Obama is a spending effort by the government to right the economic ship in America.  Slowly ballooning from $819 billion when it originally passed in Congress to well over $900 billion now, the Stimulus Bill is awaiting approval from the Senate.  Some senators still need to change their votes for the bill to be passed, but it should be noted of what government stimulus consists:

“The Congressional Budget Office defines the goal of any such package this way: ‘Fiscal stimulus aims to boost economic activity during periods of economic weakness by increasing short-term aggregate demand.’ The theory is that if more goods and services are being bought, whether cement for a new highway or groceries paid for with a tax rebate, there is less chance that falling demand will lead companies to lay off workers, resulting in greater falls in demand and a deeper downturn.” (Source: NYTimes.com)

Read on:

NY Times – Economic Stimulus

WSJ – Watchdog Says U.S. Overpaid For Troubled Assets of Banks

No, not that kind!

If it hasn’t happened already, the next time you find yourself at a cocktail party or even the local bar, you are likely to hear people talking (read: complaining) about the government and the bailout.  Then you’re going to hear the word “TARP” uttered by someone.  Instead of the normal head nodding you do followed by a short prayer that no one asks your opinion, this time come prepared.

Definition: TARP = Troubled Asset Relief Program

A story in today’s Wall Street Journal describes with some detail where half of the $700 billion has been committed so far.  Even if you don’t read it, come away from this post knowing that $45 billion has been committed to Citigroup, $40 billion was lent to AIG, the 3 major U.S. auto companies (GM, Ford, Chrysler) WANT billions but haven’t been given anything yet, and Henry Paulson (the Treasury Secretary) is under fire for being wishy washy about what to do with the other half of the $700 billion. 

In short, Paulson is in a situation similar to a mom giving a child $10 to buy candy for the child’s friends only to have 78 “friends” tag along.  To top it off, a different “mom” is going to replace the current “mom” in a couple months.  Hard to believe, but $700 billion appears to be nowhere near enough to solve this credit crisis.  Feel free to use the candy analogy while sucking down your fourth Fat Tire of the night as you are asked what you think of Paulson.