Thursday, September 24, 2009

More time under the TARP

Senatus reports that Assistant Secretary for Financial Stability Herbert M. Allison went to Capitol Hill and knocked 'em dead with his Hank Paulson impersonation:

The Treasury Department “is unlikely to discontinue its $700-billion relief program by the year’s end,” according to The Hill.

Lawmakers originally scheduled the Troubled Asset Relief Program (TARP) to conclude this December, but they also permitted Treasury Secretary Tim Geithner to extend the program until October if he felt he needed the extra time to rehabilitate struggling firms.

While lawmakers have recently signaled their dissatisfaction with that idea, Assistant Secretary for Financial Stability Herbert M. Allison suggested to the Senate Banking Committee on Thursday that an extension was still likely.

"Declining prices in the commercial real estate market could put additional pressure on bank balance sheets and capital positions, while continued downward pressure on housing prices could stall a nationwide recovery," he said during the hearing. "In this context, it is prudent to maintain capacity to address new developments. By bolstering confidence, having such capacity may actually reduce the need to use it." [E.A.]

You may recall that Paulson used this same logic in pushing the various bailout packages through Congress last fall. I believe his version revolved around not needing to use a "bazooka" as long as everyone knew you had it.
Well, it didn't work then and it won't work now. The Obama administration should drop this utterly senseless defense of the program. I'm not buying it and neither should any sane person.

The overwhelming message from various administration officials has been that the economy is recovering. If that is the case, why the need to continue the TARP?

The real answer is that once power is ceded to the government it is difficult to get it back. Ever. This is particularly the case when it comes to the federal government.

To be sure this is one area where Washington demonstrates the much ballyhooed bipartisanship. Therefore it is very important that voters think twice before we surrender any more power over our affairs to government at any level.

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