>> As a result, only $432 billion will be disbursed
>> through the TARP, CBO estimates, well below the
>> $700 billion initially authorized.
>
> "_Only_" $432 billion ? Less than half of that would take
> care of about all of the state and local government deficits,
> no?
I think you're confusing TARP, which is basically a loan program, with expenses. TARP is a purchase of assets (Troubled Asset Relief Program), many of which are expected to recover. When the credit freeze happened, many worthy credits were trapped. It's called a "bailout" because it allowed banks to sell -- at rock bottom prices! -- assets that they couldn't otherwise sell, because who would buy them at that time? It wasn't to cover losses at the banks; it was to stop the losses from continuing.
They thought that they might have to buy up to $700B of assets, but it turned out to be a lot less (this is the subject of the above quote). And many of the assets purchased have appreciated significantly in the last two years, so much so that the gains may ultimately erase the losses (of course some of the credits were indeed stinkers). Treasury, through TARP, became a giant hedge fund.
As in any asset purchase, this isn't a "cost" -- it's an exchange of assets with the net result that Treasury became a holder of debt.
What you're talking about is to purchase ("take care of") the *expenses* of the States, which isn't anywhere on the radar.
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FWIW, here's a decent overview of the State deficit situation:
http://www.cbpp.org/cms/?fa=view&id=711
/jordan