Hey, Mr. Prez … Here’s a way to fund about 1/2 of your healthcare package.

Did you know …

TARP will expire on December 31, unless Geithner exercises his authority to extend it to next October.

Right now, Geithner is sitting on over $300 billion of uncommitted TARP funds, thanks in part to bank repayments. Treasury believes it has the authority to spend that returned money on new adventures in housing or other parts of the economy.

Since the TARP has largely ignored its designated mission — buying up bad mortgages and their derivatives — and has evolved into a $700 billion all-purpose political slush fund, why not simply declare success and throw the money at insuring the uninsureds?

Hmmm …. 

* * * * *

HiLites from WSJ: Rolling up the TARP, Oct.  27, 2009 

Historians will debate TARP’s role in ending the financial panic of 2008, but today there is little evidence that the government needs or can prudently manage what has evolved into a $700 billion all-purpose political bailout fund.

TARP quickly became a Treasury tool to save failing institutions without imposing discipline (Citigroup) and even to force public capital onto banks that didn’t need it. This stigmatized all banks as taxpayer supplicants and is now evolving into an excuse for the Federal Reserve to micromanage compensation.

Even with the banks, TARP has been a double-edged sword. While its capital injections saved some banks, its lack of transparency created uncertainty that arguably prolonged the panic.

By stating expressly that the ‘healthy’ institutions would be able to increase overall lending, Treasury created unrealistic expectations about the institutions’ conditions and their ability to increase lending.”

TARP was then redirected well beyond the financial system into $80 billion in “investments” for auto companies. These may never be repaid but served as a lever to abuse creditors and favor auto unions.

TARP also bought preferred stock in struggling insurers Lincoln and Hartford, though insurance companies are not subject to bank runs and pose no “systemic risk.” They erode slowly as customers stop renewing policies.

TARP also became another fund for Congress to pay off the already heavily subsidized housing industry by financing home mortgage modifications. Not one cent of the $50 billion in TARP funds earmarked to modify home mortgages will be returned to the Treasury, says the Congressional Budget Office.

TARP’s Congressional Oversight Panel warns that the entire taxpayer pot could be converted into subsidies. They are especially concerned about expanding the foreclosure prevention programs that have been failing by every measure.

The political class has twisted TARP into a fund to finance its pet programs and constituents, and the faster it fades away, the better for taxpayers and the financial system.

Full article:
http://online.wsj.com/article/SB10001424052748704224004574489740879074028.html?mod=djemEditorialPage

* * * * *

On B of A and Merrill …

The government also endangered one of the banks that they considered healthy at the time.

According to Fed documents, the government viewed BofA as well-capitalized, but officials believed that its tangible common equity would fall to dangerously low levels if it had to absorb the sinking Merrill.

In other words, by insisting that BofA buy Merrill, Messrs. Paulson and Bernanke were spreading systemic risk by stuffing a failing institution into a relatively sound one.

And they were stuffing an investment bank into one of the nation’s largest institutions whose deposits were guaranteed by taxpayers. BofA would later need billions of dollars more in TARP cash to survive that forced merger, and when that news became public it helped to extend the overall financial panic.

Full article:
http://online.wsj.com/article/SB10001424052748704224004574489740879074028.html?mod=djemEditorialPage

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