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Source link: http://archive.mises.org/8984/the-tarp-is-dead-long-live-the-tarp/

The TARP Is Dead, Long Live the TARP

November 19, 2008 by

Congress gave Hank Paulson the $700 billion, and the first thing he did was to take $125 billion out of the bag and give it to his pals at the nine biggest banks and investment banks in the country. Never one to display ingratitude, he gave $10 billion to Goldman Sachs, the firm he had headed before passing through the revolving door to the Treasury. He went on to give other big financial institutions a cut of the loot, too. So generous was old Hank with the taxpayers’ money that he has now handed out $290 billion of the $350 billion that Congress authorized him to spend immediately. FULL ARTICLE


Enjoy Every Sandwich November 19, 2008 at 8:39 am

I saw some of the congress folks on the TV last night, caterwauling that Paulson had duped them.

There are two possibilities: they’re telling the truth, or they’re lying. Neither possibility reflects well on them.

greg November 19, 2008 at 9:14 am

TARP was a bad idea from the beginning. Just the cost to maintain assets they were going to buy and hold for 5 years was going to break the bank well beyond the asset value. Now the current use of the money may look like stroke of genius when the economy turns around. Right now the US is selling 10 year T-Bills at around 3.75% interest and they are lending that money to AIG for 10% interest. Some of the other terms have better rates, but they are well north of 3.75%. And the terms of the prefered stock they are taking is like a super perfered that further protects the government’s investment.
My concern is down the road when these shares are paid back. I don’t trust the government to use the money to pay off those T-bills they sold to get the money.

Eric November 19, 2008 at 10:41 am

Just to stir up the t…s in the punchbowl, how about this thought:

If the Austrian Business Cycle Theory is correct, it was the fed policy and ultra low interest rates which led to the malinvestments at the heart of the trouble we have. Therefore, the fed is responsible and should be made to pay up. But the fed is really just a de-facto government entity, since it has the legal right to use force – legal tender laws etc.

As Ron Paul said in the debates (on correcting mistakes made by government), it is the responsibility of the American taxpayer (and voter) through their representatives to correct the mistake. Thus it’s the fault of the American taxpayer for not electing hundreds of Ron Paul’s to congress. This means that anyone who was tricked by the fraudulent fed into making bad investments has a legitimate claim against the federal government. You, me, everyone should get bailed out if the fraud effected them.

And you, me, and everyone is responsible for electing such trash to government, and if we are ever to correct this system there needs to be punishment for mistakes. Perhaps we should make the legislators mostly responsible, but the voters should also bear some responsibility. It should be like a corporation, if it makes a dumb move, it should pay for it, first by firing the board of directors, but secondly, by having your investment shares become worthless.

And to be fair, the American system should be allowed to go bankrupt and we should have a fire sale of all the public assets. We could start by selling off the federal reserve buildings.

Then the national parks should be the next to go, since these would be much better off in private hands anyway. A condition of the sale could be that the new responsible owners would have to bulldoze 200 meter firebreaks around all of them – since these are the lands where the fires always start and government has never been responsible and ignores brush clearance laws.

And as Harry Browne used to say, then after doing this on the morning of his first day as president, he’d take a lunch break. Later in the afternoon, we can start on the rest of the alphabet soup of adjacencies. Lots of items to liquidate here.

Dick Fox November 19, 2008 at 12:11 pm

Great article!

Sadly there are too many of us saying, “I told you so.” Remember when the calls to congress on Friday brought down the whole deal. Then over the weekend the congress did an end run by adding the House bill to a Senate bill allowing the Senate to pass it. All those phone calls have been exonerated of all the things they were called by the newsmedia and members of congress.

Todd November 19, 2008 at 12:16 pm

Eric, how are we, The People, supposed to be held responsible for who gets elected to office? Sure, on a local and sometimes a state level, we have a voice and we usually get candidates that are more closely in tune with the public. But on the national level, the two party monopoly leaves us with very few alternatives but goofballs who move up through the party system. In this election, I logged protest votes in every race that had a third party option, but my votes really did not count. Now, I am governed by a group of people that I did not vote for, who do not listen to their constituents and do not care about the future of this country. What now?

Michael A. Clem November 19, 2008 at 12:39 pm

We’re saying, “I told you so”, because there’s little else we can do. If they don’t get what we’re saying, they’re certainly not going to change their ways. And given the state of electoral politics, I sincerely doubt that merely electing the “right people” to office will fix the problem. There’s only one Ron Paul, not hundreds of them. As a former Libertarian presidential candidate, and now as a Republican presidential candidate, Ron Paul continues to face roadblocks. It should be obvious that the current system is designed to resist major changes.

Eric November 19, 2008 at 1:38 pm


The issue isn’t that there are no choices, or even that the system is unfair. The problem is that 51% of the voting public doesn’t really care that much about freedom. They didn’t vote for the freedom candidate – as I did.

Let me try to put it in Austrian terms. The marginal value of an additional unit of freedom is not very high on the list of most people. Or, I’d say that opportunity costs are simply too high for nearly all people to decide to be revolutionaries. And a revolution by force is likely what it would take to make this a free country again.

Now, I can’t really condemn all individuals, since everyone is different. But if we are a union of people, then whatever that union does in the aggregate is still the responsibility of ALL the members of the union. By responsibility, I don’t mean guilt, or even feeling bad about the outcome, what I mean by responsibility is that we all must accept the results of our decisions.

Therefore, it appears we are going to pay for our mistake of letting the FED (and the rest of the federal government) ruin the economy. It’s just that now, the government is trying to make its enemies pay while its friends get paid.

We live in America, and at least one founder wrote that when a government becomes tyrannical, the people have the right to remove that tyranny, by any means necessary. But it seems clear, they either don’t have the will to remove tyranny, or they don’t perceive there’s enough of a problem.

Either way, as long as there are still elections, whoever is chosen is the choice of the people. I live in CA and there were 7 or 8 presidential candidates on the ballot and 4 more registered write in candidates. I wrote in Ron Paul. He didn’t win because the people didn’t want him as president. Whether from ignorance or anything else, the people did still decide. If the people are dumb, and they do stupid things, they are at fault. They are responsible. So they should pay.

And that’s why everyone affected by the government’s fraudulent money system should get restitution, and everyone responsible should pay. That these two groups are likely the same, or at least quite large should be irrelevant. That it would totally bankrupt the FEDs, so be it. Besides, as Lew Rockwell often says, the articles of confederation were much better.

Todd November 19, 2008 at 3:17 pm


Your statement is clearer now, but, in the end, we are still stuck with a government that is fundementally broken. Who is responsible for it is really a moot point.

On the subject of needing “nearly all people” to be revolutionaries, our founding fathers were not the majority. They were a visionary few that lead the sheeple to a direction they knew to be the correct one. One thing for sure was that the colonies did not have a clear majority of the people in favor of the Revolution.

Bruce Koerber November 19, 2008 at 8:24 pm

Paulson did what he was appointed to do! I am not talking about the wishy-washy, foolish, ill-conceived trust conferred upon him by Congress. Nor am I talking about his appointment as Treasury Secretary by complacent underlings!

Paulson did what he was appointed to do when he was chosen from among the inner circle of the unConstitutional coup to go finance the coup – no matter what – by piggybacking authority to any and all legislation whisked through Congress while the members of Congress sleeps, or goes to bed with coup-connected lobbyists, or burps from having their belly full with porkbarrel funds to satisfy their ego-driven interventionist tendencies.

When January rolls around he will slither back to the inner circle and a less senior official of the coup will take his place as Treasury Secretary.

Student Loan Lender November 20, 2008 at 8:01 am

Robert, you could not be more wrong. Credit markets are illiquid. Sure, credit cards, home loans, and car loans continue. For now. I know first hand, however, that credit between large companies has virtually ceased. In the student loan space, lines of credit used to make loans to students and the bonds used to permanently finance them are GONE. Completely GONE.

However, I do share your sentiment that the bailout has NOT worked well. Our company, along with hundreds of others, are not able to make student loans this fall.

And you say that the “frozen” credit market claim is hooey?

Maybe you’re just not in the know.

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