BP compensation money to be "slush fund?"

[MikeMangum]

So Limbaugh and a congressman from Texas have both characterized the BP $20 billion compensation fund as a "slush fund."


Um....what?

Seriously where does that idea even come from?

It was also characterized as a "shakedown."

Right..........BP is the victim in this.

I don't necessarily know that BP is a victim, but yes, these sorts of things do tend to turn into slush funds. Look at all of the different places the TARP money is going. The legislation that appropriated that money only authorized that money to be spent buying mortgage backed securities, but it has been used for all sorts of things. Some went to banks (not as part of MBS purchases, but loans) some went to GM, Chrysler, insurance companies, some was shunted aside for the loan modification program (the program that ignores contract law and forces banks to simply write off principle for borrowers who owe 115% or more of what their house is now worth), some went to bail out pensions funds, some went to at least one trucking company, etc. The one place TARP money did NOT go was where it was actually supposed to go according to the bill which appropriated the money: to purchase mortgage backed securities, removing the paralysis in that market so that banks could actually place a better value (using mark to market rules) on their holdings of MBS, increasing their (paper) capital reserves and allow them lend again.

TARP money paid back by banks (and the dividends for the preferred stock the government recieved in return) just goes back into the TARP fund and is then used for other things. This is even though the actual bill says that any money made from TARP "shall be paid into the general fund of the Treasury for reduction of the public debt."


From The Hill: Obama Wants TARP Funds For Jobs Bill.

From the WaPo: White House Eyes Bailout Funds to Aid Small Firms

Barney Frank wanted to take the TARP money and use to subsidize low income housing.

From February:

The statement

"The law is very clear! 'The monies recouped from the TARP shall be paid into the general fund of the Treasury for the reduction of the public debt.' "

Sen. Judd Gregg on Feb. 2 in a Senate budget hearing

The ruling

President Barack Obama has proposed a boost for small businesses, but Sen. Judd Gregg isn't hot on the idea.

In a hearing about the administration's latest budget, Gregg, a New Hampshire Republican, criticized the White House for proposing to use funds from the Troubled Asset Relief Program, an initiative originally intended to keep the banking system from collapsing, to help community banks lend to small businesses. Gregg said it violates TARP rules.

"The whole concept of the TARP was that as we recoup the money … we would use it to pay down the debt," Gregg said, responding to Obama's Feb. 2 proposal to transfer $30 billion from TARP to a new program that will support small-business lending.

Some of it ended up being spent on lobbying Congress: TARP Money Funded Massive Lobbying Expenditures in 2009

Newsweek: TARP Funds Get Recycled As Political Contributions

A NEWSWEEK review of recent filings with the Federal Election Commission found that the political action committees of five big TARP recipients doled out $85,300 to members in the first two months of this year—with most of the cash going to those who serves on committees who oversee the TARP program.

ETA: the actual issue of the "toxic assets", the paralysis of the market for mortgage backes securities was never actually addressed by TARP. The Federal Reserve had to take care of that by printing $1.25 Trillion for the purchase of one quarter of the entire MBS market.

 

[thaiboxerken]

It's nice to see the real Republican face come out, wanting to bail out BP with tax money.

 

[Travis]

So, in other words, Obama is supposed to use magic powers to create a system that will make sure people get paid "yesterday" but is absolutely immune to possible fraud. I guess he'll have to tap the same magic powers he needs to use to cap the well.

 

[BeAChooser]

but is absolutely immune to possible fraud.

Nah, we'd just like a system that is a little more efficient and a little less corrupt than the one he set up to hand out the stimulus money. And maybe he could appoint someone to head the fund who is not already one of his czars? Who really is an independent 3rd party?

 

[MikeMangum]

It's nice to see the real Republican face come out, wanting to bail out BP with tax money.

So, in other words, Obama is supposed to use magic powers to create a system that will make sure people get paid "yesterday" but is absolutely immune to possible fraud. I guess he'll have to tap the same magic powers he needs to use to cap the well.

Stop, it you two, my hay fever is going to start acting up from all of that straw.

 

[JoeTheJuggler]

It's called the civil courts. Believe it or not, we already have an entire system devoted to determining whether compensation for damage caused by one party to another is required, and how much. That system, for all it's [sic] flaws, has strenuous methods of fact finding to determine responsibility and elaborate means of determining economic damages and putting dollar amounts (for recompense) on non economic damages, with all sorts of protections built in to prevent abuse.

And I guarantee you there will be civil suits that go to court at some point. At this point, I think we're talking about the best way to settle a great many claims that BP is not contesting.

Also, I hope some of BP's top executives end up in criminal court. There are strong allegations that this disaster is the result of criminal negligence. Eric Holder says he's looking into it.