“[T]roubled assets from any financial institution.” That’s what the financial services bailout bill allowed the Treasury Department to buy: “troubled assets from any financial institution.” They were talking about bad mortgages.

But then the money got used to buy pieces of financial institutions themselves. Some Members of Congress raised a stink when word circulated that the money would be used to pay dividends – because it wasn’t their preferred violation of the terms of the bailout law.

Now the talk is of using the money to give loans to automakers.

Let’s take a look at what the law said again:

“The Secretary [of the Treasury] is authorized to establish the Troubled Asset Relief Program (or ‘TARP’) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution . . . .”

Now, it’s true – Congress left the definitions wiiiide open:

The term ‘troubled assets’ means–

(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and

(B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

But do you think that loaning money to automakers is a “purchase” of a “financial instrument”? Well, that’s a small hurdle. The Treasury Secretary can structure the loan to look like the purchase of a financial instrument, and voila.

I was a little hesitant when I wrote this post back in early November to call the $700 billion in bailout money a “slush fund.” But it appears now quite clearly to be a slush fund.

It’s a slush fund, a slush fund, a slush fund. Congress and the Administration passed themselves a law to create a slush fund. Now they’re debating how to dip into this slush fund.

I repeat: It’s a slush fund.