Bear Mountain Bull

The Big Picture lays out “The Terrible Lessons of TARP”:

Let’s take a quick look at some of the shortcomings and misfires the TARP has yielded:

1. No Strategic Plan:  What was the original purpose of the TARP? Its hard to say, other than it was of the greatest importance it be passed with minimum debate and even less information. Without stated objectives, its difficult to evaluate whether it is achieving those goals.

2. Methods and Tactics: By what method was the TARP to be implemented?  Buy distressed assets? Recapitalize the banks? Rescue foreclosed homeowners? Stimulate the economy? The constantly morphing objectives make it hard to take the original claims very seriously.

3. No Triage:  There seemed to be no evaluative method in determining which banks should be saved and which should be put down. If the goal was to strengthen the financial sector, then the approach is to help those that can be strengthened, and have an orderly liquidation of those that cannot.  Merely throwing money at weak and dying banks is no long term strategy.

4. Wasting Taxpayer Monies:  Why did private investors like Warren Buffett get so much of a better deal than Uncle Sam? Its clear to me that both Treasury and the Fed lack the expertise to negotiate these investments. Instead, set up a matching investment. Let those in the private sector with the expertise to do so make substantial arms-length investments, with the the US matching ( at 10 or even 20X) on the same terms.

5. Transparency, Accountability, Responsibility: How monies have been spent by the Treasury department (and Fed) should be a textbook example of government accountability and transparency. Its not, and there is no good reason why. The Fed is w\even worse, refusing to release any details, which has led to lawsuits being filed by Bloomberg and Fox News to get the specific public information.

6. Evaluating Progress:  All major programs should have some method of evaluating if they are achieving their goals. This is missing from the TARP, and its why so many people have no idea if it has been successful or not.

7. Moral Hazard:  Why are we rewarding companies that were poorly managed, reckless money losers? All of the TARP recipients should have anyone senior management associated with the bad investments fired; bonuses suspended, shareholders wiped out. How are these firms paying dividends with government money? Where are the clawbacks of bonuses from Stan O’Neill, Angelo Mozilo, Chuck Prince? That the people responsible for the mess are even remotely profiting from it is simply unconscionable.

As bad as the $700 plus billion expenditures have been, the real damage lay in the future. When in doubt, traders will go bigger and more reckless than ever before. That is the terrible lessons of the TARP: Make sure you screw up big enough to get the taxpayer to rescue you . . .

I think they should have renamed the program to come up with a more fitting acronym. You know, something like TRAP, CRAP or BARF.

And speaking of TARP money, it’s time for Act II: “Obama has asked Bush to request the remaining $350 billion in TARP funds from Congress.”