TARPUS Interruptus

The TARP continues it amazing morphing machinery, as it migrates miles and miles away from the original bill of goods sold to Congress.

The government is abandoning the centerpiece of its $700 billion rescue effort for the financial system and will not use the money to purchase troubled bank assets.

Why? Because Treasury Secretary Paulson has finally figured out what many experts previously stated: that buying troubled asset purchases “not the most effective way to use TARP funds. ”

Instead, we are finding all sort of new, unapproved and inefficient ways to spend the TARP. Everyone from GM to AMEX is up for some Federal (read taxpayer) largesse.

No matter. Hank the Destroyer said that we will continue to use $250 billion of the program — or, as it was known when he was helping to leverage up Goldman Sachs to unsustainable levels as “walking around money” — to recap bank stocks, bolster balance sheets and “encourage them to resume more normal lending.”

Up next is an expansion into securitized credit card debt, auto loans and student loans.

And soon after, the government will start to guarantee new GE Capital debt.

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