The TARP has not been a politically popular scheme, so there’s no reason why Obama would want to keep it as it is. According to The Journal, he and his team are exploring possible changes, such as providing more direct relief to homeowners, and creating that originally-planned market for illiquid “toxic” securities. No doubt Obama wants to do all these things, but is there enough left? That $350 billion won’t go very far in terms of homeowner relief and asset purchase — oh, and he’s still interested in injecting more capital into banks:
The Obama team, hoping to avoid the criticism leveled at Mr. Paulson by lawmakers that he lacks a consistent strategy, is also working to come up with a way to cogently explain the rationale behind its approach.
One key distinction will be in the approach to helping homeowners facing foreclosure. Mr. Paulson and the White House have resisted calls to embark on a government rescue of homeowners. The Obama team, by contrast, sees that as a critical leg of its financial-crisis rescue plan, people familiar with the matter said.
Democratic lawmakers are pushing for Mr. Obama to take steps quickly to help at-risk borrowers. Details of the Obama foreclosure plan aren’t known, in part because they are still being hashed out.
We suspect that without much money left, Obama and the Democrats will pass some new scheme before too long, probably focused directly at homeowners. In fact, it could come to resemble the plan put forth by McCain to create a new Homeowners Loan Corporation that would buy up mortgages directly. We’ve no doubt that McCain, who’s made a career of pissing off his own party, would love to spearhead a bipartisan effort to get this done. Watch for it.