Why is Obama rejecting repayment of TARP money?
Another shout out to Mark for sending over an interesting opinion article from the Wall Street Journal. In the article, Mr. Varney makes a compelling argument that the Obama administration is seeking direct control over the banks by keeping their stakes in them. This is far too close to the public sector crossing into the private if you ask me. Here are a few quotes:
“The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.”“If the banks are forced to keep TARP cash — which was often forced on them in the first place — the Obama team can work its will on the financial system to unprecedented degree. That’s what’s happening right now.”
“Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend?”
So readers – what do you think? Does the government have its hand too far inside of the private cookie jar or is this OK since the government gave them the money in the first place?
I’m not one to just take the administration’s word on issues where there isn’t complete and total transparency – but I think the WSJ opinion piece is a case study in thin evidence justifying paranoia.
I haven’t forgotten that these are the same banks who claimed they were just fine before this debacle and I haven’t forgotten that the Treasury Department is in the middle of stress testing these banks to truly gauge their health – I forgive them for not just taking these guys word for it.
I think it’s clear that the stress tests should have preceded the TARP, but what’s done is done (and was done under Bush’s Treasury). Banks like BofA were made to take the money so it wouldn’t make them look exceptionally strong or banks like Citi look exceptionally weak.
So where does that leave us now? Treasury will make its move when the stress testing is done, until then these guys should just sit tight. If they know their books will prove them out as strong financial institutions, why don’t we hear them clamoring for real-time data and more transparency in the stress testing?
Take another look at your headline. This is the point, it’s not what the Administration is going to do as the conglomerate owner. History has given us that grim answer time and time and again.
The scarier point is that somewhere between the administration’s (and, granted, the Bush Administration’s early) argument for “saving the economy” and later Obama’s denial for repayment, the Obama Administration made an unconscionable reversal or its promise, namely, that they can not only run industries better than the people, but refuse company’s and stockholder’s rights as determined in the original TARP contracts. The people believed that TARP was a loan, we were told that we were getting our trillions of dollars back once the companies stabilized and repayed – not be charged and taxed for it. Constitutionally, we used to call this the right to the pursuit of happiness (property – Supreme Court Justice Samuel Miller), now our government is acting no different than Venezuela’s early nationalization of the oil sector.
Executive greed is the largest threat to fixing the banking sector at this point. It is causing a distrust between the bank companies and the government. The government is hesitant in taking repayment thinking the executives only want to begin to control their own compensation. So, now we’re having to deal with inefficient bureaucracy because in the past decade the executives have, as my mom always used to tell me when I betrayed her as a kid, “cooked their own goose.”