MacroScope

from Tales from the Trail:

Bold budget boosts bailout

USA-OBAMA/How do you buy $750 billion of toxic bank assets with only $250 billion of taxpayer money?

If you know to play U.S. budget rules like a violin.

President Barack Obama told Congress in passing this week he might need more money than lawmakers have already approved to stabilize banks and pull the economy out of the ditch. 

How much? His budget virtuoso Peter Orszag said on Thursday he could support buying up to $750 billion in bad assets but only needed to set aside $250 billion to do it.

Regular US budget rules assume government credit subsidies will recoup some of their value. Appropriators budget for such items according to how much they think the government will lose -- not the full amount of the credit.

Orszag explained his thinking on Thursday:

"Honest budgeting suggests, when you pay a dollar for a financial asset, that doesn't make the government worse off by a dollar," he said at a news conference. "It's not the same thing as a net cost of a dollar, because you are getting something in exchange for it."

Got advice?

Treasury Secretary Henry Paulson (L) and Assistant Secretary for International Economics and Development Neel Kashkari are pictured in an undated handout photo.The U.S. Treasury Department expects to name asset managers for its $700 billion financial rescue plan within days and is working “around the clock” to thaw credit markets, the program’s new chief, Neel Kashkari , announced Monday.They’ve tapped investment consultants Ennis Knupp and lawyers Simpson Thatcher to help out. Reuben Jeffrey, a State Department official, is going to be interim chief investment officer while chief financial officer for the Office of the Comptroller of the Currency, Tom Bloom, will serve as the program’s CFO.The Treasury’s Troubled Asset Relief Program, known as TARP, also has provisions for limiting executive pay packages.Treasury Secretary Henry Paulson (L) and Neel KashkariWhat advice would you give to officials at the Treasury?If you want to read Kashkari’s speech in its entirety, click here