A congressional panel is set to release a scathing criticism of the TARP tarp:
WSJ: “The panel’s initial concerns about the [Troubled Asset Relief Program] have only grown, exacerbated by the shifting explanations of its purposes and the tools used by Treasury,” said the draft report, which found that the department has “not yet explained its strategy” for stabilizing the financial markets.
The report faults Treasury on a variety of fronts: having no ability to ensure banks lend the money they have received from the government; having no standards for measuring the success of the program; and for ignoring or offering incomplete answers to panel questions.
The bipartisan panel, headed by Harvard Law School professor Elizabeth Warren, reserved its most strident criticism for Treasury’s approach to dealing with the foreclosure crisis at the root of the economic turmoil. The draft report noted that Treasury hasn’t used any of TARP’s $700 billion to help borrowers refinance or deal with mortgages that are worth more than the market value of the homes they are tied to.
Alright, so it sounds like the typical tarp criticism. Banks aren’t lending enough, it hasn’t done enough to help “Main Street”, etc. No wonder Neel Kashkari was out yesterday saying that the financial system in the US had stabilised. That, of course, was and is the only real goal. If the goal of the TARP had been to solve the mortgage crisis, they wouldn’t have rushed it through in a weekend. And as we’ve discussed ad nauseum, this idea that banks must lend the money, which was used to plug holes in their balance sheets, is just silly.
And as long as we’re going to cherry pick reasons to call it a failure, we can always do the opposite. There haven’t been any big bank failures since TARP, the commercial paper market is starting to expand and the TED spread, one of the best measures of bank health is back to levels not since before the Lehman collapse. Take a lap Kashkari!
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