Question: Is the $68 billion that big banks are paying back in TARP money going back to the taxpayer or can it be reused by the Treasury in some of its other schemes (e.g. subsidizing hedge funds into buying toxic assets)? In effect, can you walk out with the money you recovered at the casino or will it be rebet on another risky asset until it is all gone?
Paul Solman: Money is fungible. That means it can be used for any purpose. If I get an extra $68 billion, I can spend it all on the needy, buy myself a diamond as big as the Ritz, or bet a billion on the number 36 at a roulette wheel in Vegas and keep doubling down. So too with Uncle Sam.
Is Sam LIKELY TO spend this money on the financial system than any other $68 billion he might get? Yes, I suppose, to the extent that it replenishes a pool of money – the TARP – that was appropriated for those purposes.