No this is not some back hand way of paying Paulson a compliment. They are not magicians in the complimentary sense, but they have taken the art of distraction used by magicians to a new height. By getting everybody to focus on the TARP and its "bailout of Wall Street" they have successfully distracted everybody from what might be charitably described as a "give away to fat cats" although others might prefer the term "swindle"
Check out all the comments on the auto bail out and bail out's by the government in general. You will notice that the $700 TARP is repeatedly mentioned. Usually in the context of a hand out to Wall Street. Here is the interesting thing- in its present incarnation the TARP is actually the most transparent and least costly of all the governments bailouts and in fact not much of a handout at all.
The original TARP proposal envisaged the Treasury purchasing toxic assets from banks at their "long term investment price" a.k.a. as at an above market price. Now, had they gone ahead with that plan, that would have been a total give away to the banks. In the end they decide not go down that route instead they decided to take the money and invest in preferred stock issued by the banks. By doing so the Treasury has ensured that the tax payer will not lose money on the investment until the common equity investors have been wiped out. Interestingly the low interest rate on the preferred hasn't cost the treasury anything nor has it provided much of windfall to the banks- actually they are losing money on it- they are borrowing at 5% and lending the funds back to the Treasury at 0%. In other words the oversight committee established with great fanfare is going to come back with a rather favorable report.
Here is the brilliant part of the Paulson crew plan and why they are like magicians. They have us all focusing on the TARP, hyperventilating about the give away to Wall Street, while the actual "give away" is going on elsewhere. It is the deals that the Federal Reserve and the Treasury/FDIC(in the case of Citicorp about a $25billion give away) are doing; which are not approved of nor overseen by the Congress- the Federal Reserve has not been willing to make available details of their various financing proposals.
It actually was quite brilliant not to use the TARP to purchase toxic securities. The scrutiny they would have received after the first few purchases would actually limit what they could have done for their old buddies. It is not clear to me whether using the TARP as a distraction was their plan from the start or something that they fell into. I lean towards the latter since the former would require a level of competence that they haven't demonstrated.
Now that so many advocates of the auto bailout are using the TARP as a reason Paulson and crew have actually got a two for one for their Wall Street buddies. They get to help them directly via the TARP and indirectly through the auto bail out. You have to admire the con!