Here’s what we do know about the federal government’s $700 billion plan to solve the nation’s financial crisis: 1] half the money, $350 billion, has been doled out; 2] the purpose of the Treasury’s Troubled Asset Relief Program, or TARP, has been in a constant state of revision since day one; 3] bailout eligibility is ever-expanding; and 4] handing out the second half of the pot began in mid-January, much of it committed to aiding homeowners, U.S. automakers and Bank of America.
Here’s what we don’t know about the federal government’s $700 billion taxpayer parachute: what any of the banks or veeery loosely defined “financial institutions” are doing with their share of the so-called bailout.
Don’t blame the bankers for their tight lips. Our government made it quite clear that we’re not entitled to know what—if anything—these financial institutions, including the four based in Louisiana that have accepted $435 million, are doing with our money.
Perhaps you read somewhere that Congress hatched TARP with the thought that banks would help struggling borrowers and increase lending to stimulate the economy.
“Make more loans?” John Hope III, chairman of Whitney National Bank, said to a ballroom full of analysts while explaining how his New Orleans bank planned to spend its $300 million in bailout cash. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
Whitney isn’t alone in its failure to disclose. Officials at IberiaBank ($90 million), Community Trust of Ruston ($24 million) and MidSouth Bank ($20 million) aren’t talking either. They, along with the many other regional and community banks, apparently see the “bailout” as a no-strings attached cash infusion to pay down debt, invest for future earnings or purchase other institutions should they ultimately fail.
Not surprisingly, here’s something else we know about TARP: It ain’t working.
Not only has it done bupkes to stimulate the national economy, the financial crisis has gotten worse—much worse.
Oh, and remember what the Bush administration and Democratic Congressional leaders said when they were selling the plan? Don’t think bailout, think investment; TARP will make money for government, not drain the Treasury.
Well, the Congressional Budget Office estimated earlier this month that the first $234 billion in “investments” could result in a $64 billion taxpayer loss. Who needs Warren Buffett when we’ve got the firm of Bush, Paulson & Feinstein? [Note: An investor revolt removed Mr. Bush last week and installed Barack Obama as head of the firm.]
What’s scary—veeery scary—is government’s solution to the problem is, you guessed it, throw more money at it.
Besides the hundreds of billions more Congress is considering—on top of the nearly $2 trillion already committed or under debate—there’s also talk of allowing mortgage-backed securities to simply disappear from corporate balance sheets and to allow for the creation of bad banks.
[For those who don’t know, bad banks are essentially dummy institutions where all the crappy loans and investments are dumped. These banks are allowed to fail while the financial institutions that made the crappy loans and investments in the first place get to live another day.]
I’m no financial expert, which explains why I don’t need a bailout [though I might after my future tax bills arrive], but I’m really struggling to understand how injecting trillions of essentially free and unrestricted dollars into the economy is going to solve the problem. If we’re going to abandon the free market, at least tell the private sector how it must spend its taxpayer windfall.
Here’s what I do know: With all the taxpayer money we’re promising and all the debts we’re erasing to escape this financial crisis, we’d better get cracking on the bailout of the financial mess we’re leaving behind for our children.
There’s government at work for you.