TARP – “At the time…”

Posted by David A. Peterson on 13. November 2008 in Economics |

I heard this quote yesterday and I about fell over laughing. Henry Paulson our Treasury Secretary said this when questioned why the TARP (Troubled Asset Relief Program) is changing, “At the time…”


Note to Secretary Paulson: “At the time…” was only 40 days ago. The toxic mortgages are still on the books. Why would you want the change a program that you pitched to the American public only a couple of weeks ago? Nothing has changed except probably your independent reading of the current situation.


Regardless of your reading of the current situation the toxic mortgages are still there. October saw a 25% rise in foreclosures over the previous year.


The TARP better known as the “$700 Billion Dollar Bailout” was a tough pill to swallow for all Americans. Ultra conservative Republicans were and still are definitely against this pill. Moderate conservatives went along with it even though it is against every grain of fiscal restraint they believe in.


Democrats bought the medicine hook, line, and sinker. They snapped, like a fish snapping bait, at the chance, any chance not to govern through a possible depression starting in just 100 days.


The world was sold by Henry Paulson. My sneaky suspicion is that our Treasury Secretary had to get credit flowing again, so he just pitched the first thought that came to him… “We need to buy up the toxic mortgages to get them off the books.”


This made some sense to the common man, buy these financial instruments, then hold them to maturity or establish a transparent secondary market for them. We, the taxpayers, may actually make money – what a deal.


What it appears that Secretary Paulson really wanted to do was to get the credit flowing, not just so the banks will lend to one another (which he achieved), but he wanted us (as in you and me) to start buying stuff again. He needs the consumer which is about ¾ of our economy to go on a shopping spree.


Kind of sounds like President Bush right after 9/11 doesn’t it? Lower interest rates and encourage Americans to buy till their credit cards crack. We all now know how that turned out.


The other major problem that the Secretary knew was right around the corner is our consumer debt – i.e. unsecured debt is already so high that Americans can’t afford to purchase anything right now. Also, now that first time unemployment claims are over 500,000 (the first time since 1983) I doubt that this massive debt can be repaid.


Example: American Express is actually asking for $3.5 billion from the TARP. You got to be kidding – American Express wants the tax payers to help pay off credit card debt?


True conservatives need to step up and get their message out. You can’t just throw money that you don’t have at the problem. We are not talking about $10 programs here we are talking about $1,000,000,000,000 (as in a trillion dollars) spent in one very short period of time.


Imagine the inflation that could happen once all of the dollars that were supposed to buy out a portion of the toxic mortgages are actually spent on consumer goods.


Conservatives have to stand up and get their message heard… “Dear American Express, it you were dumb enough to lend the money, then I smart enough to let you go into bankruptcy.”  “Dear Bank CEO, if you are not smart enough to gather up, re-value, and sell all of those toxic mortgages that you own then maybe we need a new CEO.”


This is tough love. Conservatives have to find ways to create long lasting jobs, but throwing money at an ever changing program is probably not the way.


Let’s prioritize the problems, find solutions, and then get a clear concise message out. We need a conservative message that will not change in 40 days.

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