The follically challenged Herb Allison is likely to take over from Neel Kashkari, the former Goldman Sachs Group (NYSE: GS) banker who brought his shiny pate to Congress to get kicked in another part of his anatomy as the Troubled Asset Relief Program (TARP) continued to frustrate almost everybody. If approved, Allison's formal title will be assistant secretary for the Office of Financial Stability which administers TARP. Under former Treasury Secretary Hank Paulson, TARP went from being a way to buy toxic assets to a source of capital for big banks -- whether they wanted it or not.

Now, Treasury Secretary Geithner wants to revive Paulson's original idea to the tune of a deeply flawed $1 trillion program to further enrich a handful of billionaire hedge fund and private equity honchos. And Geithner appears to have selected a very cold fish for that job -- former Merrill Lynch executive Allison -- a Yale philosophy major and Stanford MBA who lost out on the CEO's chair at Merrill Lynch a decade ago to the far more stock-broker-friendly David Komansky.

Treasury Secretary Hank Paulson made his bones pleasing his former colleagues on Wall Street by using a chunk of $350 billion taxpayers' TARP to pay $16 billion in bonuses to the bankers who got us into this mess. But let's face it, bankers only make tens of millions in bonuses. The really big bucks -- that is the annual earnings in excess of $1 billion -- go the the hedge fund and private equity runners. And that's where Paulson's replacement is upping the ante.

Rather than pandering to bankers who will now have their salaries capped at $500,000 if they take TARP money, Tim Geithner is going to make $1 trillion of taxpayer money available to those hedge fund honchos at the very pinnacle of the Wall Street food chain. To be fair, not all that $1 trillion will come from Treasury. In the initial phase, the Treasury will provide just $20 billion and the Fed will provide $180 billion -- but the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.

Remember when Hank Paulson was going around saying that the TARP plan would allow the United States government to buy illiquid assets at bargain prices and earn a huge profit while providing a jolt of liquidity to the lending market?

Yeah, about that. You can judge the effect that had on the economy by checking out the latest unemployment statistics. But what about the bargain prices? That turns out to have been a pipe dream. The Congressional Oversight Panel estimates that the the Paulson overpaid for bad assets by some $78 billion, amounting to a gigantic subsidy of publicly-traded companies like AIG (NYSE: AIG). AIG received $40 billion for assets valued at just $14.8 billion.

The Congressional Oversight Panel (COP) reports today that Hank Paulson's Troubled Asset Recovery Plan (TARP) stole $78 billion of our money. This sounds like a huge under count to me -- I would put the figure at much closer to $350 billion. The questions now are what to do about TARP and whether similar waste can be prevented for the next $350 billion.

How did COP arrive at the $78 billion? It claims that TARP received bank assets worth $176 billion in exchange for capital purchases of $254 billion. Two hundred banks have gotten TARP money so far. In addition to assets, TARP has gotten preferred stock and warrants in exchange for its cash. And I would guess that the amount taxpayers have lost is well in excess of the $78 billion.

It is old news that fixing the problems at America's large banks cannot be completely accomplished unless the toxic assets and toxic loans on their balance sheets recover their value or are sold to other entities. A recovery in value is almost out of the question, at least for several years. Too much of the value of the paper is based on the housing market and the general economy.

The federal government has been adroit in dodging the issue. Paulson elected not to buy bad assets with TARP money. He put the money directly onto banks balance sheets instead. When the failure of value in large pool of assets at Citigroup (NYSE:C) began to falter, the Fed agreed to share losses that the bank might incur on the bad assets.

It has started to dawn on the Obama economic and financial team that none of the past actions has addressed the real problem. The creation of a national "bad bank" to take in most of these assets and allow banks to go on operating without them may be the only way to create a safety net under the entire credit system.

The subject just won't go away. Some lawmakers want TARP money to go toward stopping foreclosures. That is not exactly what the fund was supposed to be used for, but, by the same token, it was not meant to buy equity in banks. Paulson decided to do so anyway, which opened the door for using the TARP capital for whatever the Congress or Treasury want it to be used for.

According to The Wall Street Journal, "The federal government should devote at least $50 billion of the remaining financial-rescue funds toward a plan to prevent foreclosures, said House Financial Services Committee Chairman Barney Frank Friday."

That may be a noble idea, but it is not practical. The trouble with using government money to directly aid homeowners is that it would be remarkably complex and inefficient. Which homeowners qualify? How do they get their money, or a cut in their obligations? Is the program supervised by some federal agency or by banks? Who is considered needy and who is not?

Bailing out homeowners one at a time a a proposal that makes good headlines. It may help some members of Congress look like champions of the common man. But, the only realistic way to get relief for people having trouble paying their mortgages is to cut taxes or increase national employment. A person without a job, or a person worried about his job is not likely to view paying his mortgage any differently just because the government cuts his monthly payment from $800 to $600. It is still money he does not have.

Douglas A. McIntyre is an editor at 24/7 Wall St.

A Congressional oversight committee has gone after the Treasury on how it used TARP funds. Doing so is like asking why the fire department picked a 4-inch hose to put out a fire rather than a 6-inch one. In a catastrophe, the need to save to save time trumps method.

According to The Wall Street Journal, "The U.S. Treasury has failed to reveal its strategy for stabilizing the financial system, not answered questions asked by a government watchdog, and has done nothing to help struggling homeowners, a report being released Friday charges."

What strategy would that be? Paulson & Co. were faced with a collapsing credit market and the chance that several major financial firms would fail. Under those circumstance, the whole US economic system could have melted down.

The original purpose of the TARP was to buy toxic assets from banks. The Treasury quickly decided that the process would take too long and would require complex calculations as to the value of troubled bonds which did not trade. Instead, Paulson elected to mainline capital into banks by taking equity positions in large financial firms. It would be hard to argue that this did not stabilize they system, at least temporarily.

The second major beef from the oversight committee is that Treasury did not do enough for mortgage owners. How would that have worked? Bailing out individual mortgages would have taken months, even if the process was done though the banking system. Which mortgages would quality? What would be the process for deciding whether help would be based on homeowner income or some other scale of need? How would hundreds of thousands of troubled home loans be identified.

The TARP was a fund for a series of emergencies. Looking back can always be done with 20/20 vision.

Douglas A. McIntyre is an editor at 24/7 Wall St.

A spokesman for JPMorgan Chase (NYSE: JPM) Thomas Kelly said his firm has not disclosed what it did with the $25 billion in emergency bailout money it has received. In fact, JPMorgan Chase is declining to provide any such disclosure.

AP has reported that none of the 21 banks that received $1 billion or more from taxpayers is tracking, or at least willing to disclose how they are using the money. Let me be clear -- THIS STINKS TO THE HIGH HEAVENS!

What kind of deals did Treasury Secretary Paulson make with these favored financial institutions? The money would be very easy to track. Why wouldn't that be a part of the bargain?

Paulson obviously did not read Conservative bankers? Surely you jest!, but he should have. Of course, having former Goldman Sachs (NYSE: GS) CEO Paulson negotiate with his Wall Street buddies on behalf of the taxpayer is highly suspect. At a minimum we have the good 'ol boy network operating in full form.

The banks simply are avoiding what should be required scrutiny by pleading ignorance. I don't believe the money can't be tracked, or even traced now after the fact. What happened to the idea of more transparency? More cover up I fear!

The banks should be subject to full disclosure. The use of the funds should be subject to review. Government money should be subject to the Freedom of Information Act. Why all the secrecy?

PS: Personal emails I have been receiving and the initial comments indicate strong sentiment about this issue. I encourage those that care to forward this story to their elected officials and friends encouraging full disclosure -- as promised! Obama used the internet to help win the White House, lets use it to get someone to listen with an internet blast from all over the country!

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money.

Incoming president Barack Obama is going to have to have a look at the TARP early on. There is still $350 billion left in the facility. There is a great deal of debate about whether Paulson has used the money correctly. Some analysts say he spent too much money dumping capital onto bank balance sheets and never bought toxic assets from financial firms like he said he would.

According to The Wall Street Journal, "While Treasury Secretary Henry Paulson has seized on equity investments in banks as Treasury's primary mechanism to help resolve the financial crisis, the Obama team is developing a broader approach that would likely incorporate multiple remedies." That would probably involve bring more direct help to mortgage holders. In principle that is a fine idea and it may silence some critics, but it won't work.

Pushing money to individual homeowners is a nearly impossible task to manage. It involves looking at hundreds of thousands of home loans, the incomes of their holders, and the falling value of their properties. Some yardstick has to be applied to determine who gets bailed out and who doesn't. In depressed markets like Florida or Michigan, should people get extra-special consideration?

This post is part of our feature on Money Winners of 2008. See all 20.

Lots of people thought real estate was overpriced. Many worried that banks were giving out mortgages too cheap. But what did you do about it? (Either to help the situation or to make money.) Jeff Greene, a real estate mogul in California, actually found a way to bet against the subprime mortgage folly. He made $450 million -- at least that was the count earlier this year.

Well, he didn't just think of it on his own. He basically took the idea that his friend, hedge fund manager John Paulson, had. Paulson thought that, as an individual, Greene wouldn't be able to do this complex a transaction. According to the Wall Street Journal he even used special software so investors in a hedge fund Paulson created just to exploit the subprime crisis couldn't pass on his strategy.

How Greene and Paulson made money involves two financial terms you've probably had to learn this year and never want to hear again. Collateralized debt obligations (CDOs) are the way mortgages are packaged and sold to investors in various slices of risk. Credit default swaps are the holders of those investments insured themselves -- by buying what was like unregulated insurance from one another. The credit default swaps are what got so many big companies in trouble -- they had to pay up on investments that went bad. So Paulson shorted CDOs and bought some credit default swaps.

One of the rules for the $700 billion bailout plan that Congress approved was that there would be a panel to monitor the use of the money. It appears that the group will issue a report that is relatively critical of how the cash was spent.

According to The Wall Street Journal, "The report isn't expected to contain any new findings but is expected to raise fresh questions about the program, which would further complicate the administration's deliberations over whether to ask Congress for the second half of the funds."

What is the value of the report? Probably not much. It is Monday morning quarterback stuff.

In what has been one of the great financial catastrophes of the last century the Treasury has had to do crisis management almost every day. The report will apparently ask why more money was not used to prevent foreclosures. The most logical answer is that helping individual homeowners is immensely complex and would take months given the millions of mortgages that are in default.

Paulson made a decision that the most important role for the first half of the $700 billion given to the Treasury to use should be put to work saving the banking system. Did that make sense? Imagine trying to save homes if large banks had failed? Imagine what would have happened to the stock market and confidence in the national credit system?

Was every penny of the bailout fund spent as best it could be? Maybe not, but it was close enough.

Douglas A. McIntyre is an editor at 247wallst.com.

A cardinal rule of Washington is don't tick-off anyone chairing a committee essential to your operations.

Well, it looks like this U.S. Treasury Department has done just that.

U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank have just about had it with the U.S. Treasury Department and its implementation of the Troubled Asset Relief Program (TARP).

Dodd, D-Connecticut and Chairman of the Senate Banking Committee, and Frank, D-Massachusetts and Chairman of the House Financial Services Committee, said this administration's Treasury department may not get the second half of the $700 billion TARP financial rescue fund, as they are upset at how the program is being run, Bloomberg News reported.

"I would be a very hard person to convince that this crowd deserves...the next $350 billion," Sen. Dodd told Bloomberg News.

Further, Rep. Frank said Treasury has ignored "clear Congressional intent," and that at the very least he wants to see that some of the new money was going to used for home mortgage foreclosure relief, Bloomberg News reported.

TheStreet.com's Jim Cramer says removing her from the FDIC would be a colossal mistake.

Don't kick out Sheila Bair! She knows the numbers. This morning, Bloomberg's reporting that Tim Geithner doesn't want Bair at the FDIC anymore because she is not a team player.

To which I say, "Thank heavens!" -- the team was terrible! These reports make her sound like Terrell Owens in the locker room -- a great player who is cancerous when going gets tough -- when it is actually the opposite: She is the franchise player to build around. When Indymac was seized (something I wish she had done earlier, but she waited as long as she could), she and her organization became the laboratory, the great central testing zone for what will work and what won't work to stem foreclosures, the root cause of all of our financial problems.

She was ignored, systematically ignored, even though she had the knowledge base. Both Geithner's organization and Treasury always thought the situation was either under control or could be controlled by top-down thinking: Give Wells (NYSE: WFC) (Cramer's Take) and Citi (NYSE: C) (Cramer's Take) and JPMorgan (NYSE: JPM) (Cramer's Take) and Bank of America (NYSE: BAC) (Cramer's Take) some money, they will lend, it will trickle down.

We are unfortunately not privy to the backroom deals and promises that are passing between Treasury Secretary Henry Paulson and the honchos who are benefiting from the government's massive bailout. However, two things are becoming increasingly clear: first, the financial industry has not gotten the memo about changing their business practices, and, second, the $700 billion in tax money that is keeping these companies afloat is not finding its way down to the average citizen. The big bailout was originally sold as a desperate maneuver to keep Wall Street afloat. Paulson has indicated that these funds would enable lending companies to service their toxic debt and, in turn, continue lending. In this way, America would be able to count on the credit that kept it running; businesses would be able to meet their payrolls, people would be able to buy houses, and the world would continue to turn.

Instead, some banks seem to be going on a buying spree, snatching up smaller, less successful institutions while prices are low and the getting is good. Citigroup (NYSE: C), for example, used the Wall Street fire sale to make a bid for Wachovia and pick up Forum Financial, shortly before asking for a second huge bailout. Similarly, Bank of America (NYSE: BAC) has decided to take over Merrill Lynch. A clever MBA could, undoubtedly, filter these purchases through a secret capitalism decoder ring and come up with a logical reason for them, but one wonders how gobbling up companies (and their toxic debt) is likely to help Bank of America and Citigroup to stay afloat, much less enable them to extend money to consumers. It is becoming clearer and clearer that the huge influx of taxpayer money is less about saving consumers than it is about enabling big companies to get even bigger.

Can someone please stop Hank Paulson from wasting more taxpayer money? Steve Forbes -- a failed 2000 presidential candidate I met a few weeks after 9/11 -- has called Paulson the worst Treasury Secretary in modern times. Now, Paulson wants to launch the fourth reincarnation of the Troubled Asset Recovery Plan (TARP) by buying securities consisting of bundles of consumer loans. In his effort to appear to be helping consumers, he is simply launching another failed Wall Street bailout.

Here's how I view the four reincarnations of TARP:

• TARP 1.0 was to take $700 billion to buy toxic waste from Wall Street in reverse auctions. As Paulson said, America needed to pass this plan to avoid heavenly retribution. But the plan was DOA for reasons I posted about here.
• TARP 2.0 involved buying equity stakes in banks -- the U.S. spent $159 billion for preferred shares in 24 banks. But the banks are holding onto the money and not lending it out. Perhaps they'll use it to pay $26.6 billion worth of bonuses. That's rich -- using taxpayer money to help out the people who got us into this mess.
• TARP 3.0 was the plan to cover losses on $277 billion worth of Citigroup 's (NYSE: C) toxic waste while using $20 billion in cash to buy $27 billion worth of preferred stock yielding 8% along with warrants on 254 million shares at $10.61. Expect more of these deals as Citi competitors complain of a tilted playing field and Paulson scrambles to accommodate them. But with Citi, the U.S. protected Prince Alwaleed's common shares, other banks might not be so lucky.