Most members of Congress are still remarkably upset that Paulson too the first half of the TARP money and used it for purposes much different than the ones he first set out.

Instead of buying toxic junk off bank balance sheets, he gave a number of banks "loans" to help improve their balance sheets.

It now appears that some of the $350 billion will go to Detroit.

Paulson appears to want the next and last installment of the money, another $350 billion. He has not said why. Perhaps over the holidays another big bank will get into trouble and he will have to engineer another quick bailout.

Barney Frank, Congress’s, "TARP czar", says he might agree to encourage the release of the money, if Paulson will spend it the way Frank thinks it should be. According to Bloomberg, "Lawmakers will agree to release the funds in exchange for Treasury Secretary Henry Paulson and Obama agreeing to programs that cut interest rates and forgive a portion of a mortgage’s principal."

It really does not matter to Paulson. In less than a month, he will be heading off to live in his mansion and serve on corporate boards. At some point he may even run for the Senate like another former Goldman Sachs (GS) CEO, John Corzine.

It should matter a great deal to the new administration. A lack of flexibility in using TARP funds could cause a lot of trouble down the road, especially if firms like Citigroup (C) and Bank of America (BAC) get into more hot water. Given the fourth quarter write-offs that are beginning to show up at financial firms and the recent S&P downgrade of eleven banks, there may well be more trying times ahead of American financial firms.

The other issue with using the TARP for mortgages is that it will be nearly impossible to review hundreds of thousand of troubled mortgages to see which homeowners needs help and which do not.The government can set standards, but who will impose them and who will track whether they are working?

Bailing out troubled mortgages one at a time could take months. Amnesty can be a complicated process.

Douglas A. McIntyre

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