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Use Of Funds

From the mail bag:

I have been trying to sell a busted emerging markets loan. I called up Merrill about it, because they have been known to broker trades from time to time. My salesman at Merrill called me back. Of course, he had no leads on the loan in question, but he went on to ask me if we had other emerging markets distressed loans we wanted to sell. Why? Well, he told me, the guy in charge of distressed loans in the region in question (let's call him "Joe") is looking for paper. Again, why? Joe, my salesperson proceeded to tell me, has been allocated $500 million to build prop positions in distressed emerging market loans. Now, not 10 minutes earlier, the tapes were snapping with the news that Bank of America is thirty-someodd billion short of capital in the stress-test adverse scenario. Band of America has received generous helpings of capital from the TARP and may wind up with more. What the heck is Merrill Lynch doing giving $500 million to some guy, no doubt with a 10% deal, to punt on distressed loans? And not merely distressed loans, distressed loans to foreign borrowers! How does this fit with the goals of the TARP? Wasn't the idea to stabilize the banking system, thereby protecting depositors and other creditors, and making sure credit would continue to be available for US households and corporates. How does it possibly serve a public purpose to have taxpayer money gambled on foreign loans by a guy on a deal?
What's more, the reason the salesperson was asking if we have more loans to sell was because he probably thought we were a forced seller. Now, think of the irony if that were the case. A hedge fund that received no government support and is now facing all sorts of new regulation anyway needs to sell loans to pay redemptions; ML/BAC, having run itself into near insolvency doesn't have to pay back depositors or other creditors early, because the government has provided a backstop, and moreover has gotten so much capital from the taxpayers (including the managers of said hedge fund!) that it can afford to allocate $500 million to building new speculative positions in distressed loans.
What the fuck?

Not sure we have much to add.