TARP Goes CARP Fishing

Treasury Secretary Henry Paulson has finally conceded the obvious: There is no longer a toxic asset relief program, or TARP as it was originally called. Toxic assets are not being purchased from financial services company at below market, market, above market, or even supermarket prices, for that matter. It just isn’t happening.

Why not? Partly because it wasn’t the best first thing to do anyway. While it was a cool markets uber alles exercise – we’ll let the market solve the market’s problem! – and a neat grad school thesis project, it was wildly impractical, and it never seemed any less so no matter how many times it was explained.

Instead, there is a $350-$700b Treasury slush fund for doing … stuff to get credit markets working. Mostly consumer credit. Now, that’s not a terrible idea, but it also requires immense trust in the person/people doing the spending. It also creates a very high transparency and procedural hurdle to be cleared by the those same people. After all, the opportunities for abuse and scope creep were always large, and they have now become immense and palpable.

Let’s stop talking about TARP. It doesn’t exist. Call it the PFKATARP (Program Formerly Known As TARP, at best – or if it’s to be all about consumers, maybe just CARP. Either way, it would be nice to know more about what the hell is going on and why. I’m just saying.

Comments

[bobbobwhite:]

You actually think you will ever know even 1% of what is really going on? Get serious. The "bailout" was all just a ruse to get the slush fund in place, and now the real uses of these misbegotten funds will be as wastefully squandered as the money wasted earlier that got us into the mess in the first place.And then we will be in worse shape than we were before the bailout that was to save us all. Are we having fun yet?

And, don't be at all surprised if a bunch of that money is used for stuff that it was used for months and years ago, like company trips, parties and big bonuses. And, of course bank lobbies.

2008 Nov 12 02:06 PM

[aarc:]

Better use what remains of TARP ($450B) as reserve cash to guarantee investor investments in the near future against company bankcrupcies.

This is a "once in a century" crises needing a once in a century solution. China's $600B stimulus plan is for a not so vibrant economy. The US will need an equivalent $3 trillion stimulus package for an ailing economy? Double that in order to be effective. However, where in this earth is US going to get $6 trillion?

Using govt money to buy stock market shares to re-capitalize them is simply limited in scope and with finitely small amount as compared to the size of the stock markets.

Let the investors do the tried and tested way of capitalizing or re-capitalizing companies now in trouble of collapsing.

Only that the currrent downturn is so vicious investors will never be able to catch their breath in such an extremely volatile environment.

Give them at least 3 years guarantee against company bankcrupcies with minimum 1 year holding period.

That will be enough time for the banks and the govt to sort out their policy differences; enough time for the CDOs and CDSs to untangle; provide time for financial firms including hedge funds to de-leverage without imploding; and give time for the house prices to come down gradually until they become affordable to most first time buyers.

2008 Nov 12 02:45 PM

[Dachs:]

It all seems like a joke!
Shouldn't the congress oppose to the release of the USD: 700 Bil. if the funds are used for something else than originally planned ?
The new finance minister, at least, will not be H. Paulson.

2008 Nov 12 02:46 PM

[Rokjok777:]

Biggest bank heist in history, in broad daylight. They're filling up wheelbarrows with cash and when nobody stops them at the door they're coming back a second time. Your Congressman and mine are asleep at the switch. Fox News and the Republican philosophy that gave us this mess are worried whether Obama is wearing a flag pin...

2008 Nov 12 02:57 PM