Transparent as S**t

I mean that literally and figuratively:

We supported TARP to deal with toxic bank assets and resolve failing banks as a resolution agency of the kind that worked with savings and loans in the 1980s. Some taxpayer money was needed beyond what the FDIC’s shrinking insurance fund had available. But TARP quickly became a Treasury tool to save failing institutions without imposing discipline (Citigroup) and even to force public capital onto banks that didn’t need it. This stigmatized all banks as taxpayer supplicants and is now evolving into an excuse for the Federal Reserve to micromanage compensation.

TARP was then redirected well beyond the financial system into $80 billion in “investments” for auto companies. These may never be repaid but served as a lever to abuse creditors and favor auto unions. TARP also bought preferred stock in struggling insurers Lincoln and Hartford, though insurance companies are not subject to bank runs and pose no “systemic risk.” They erode slowly as customers stop renewing policies.

TARP also became another fund for Congress to pay off the already heavily subsidized housing industry by financing home mortgage modifications. Not one cent of the $50 billion in TARP funds earmarked to modify home mortgages will be returned to the Treasury, says the Congressional Budget Office.

As of the end of September, Mr. Geithner was sitting on $317 billion of uncommitted TARP funds, thanks in part to bank repayments. But this sum isn’t the limit of his check-writing ability. Treasury considers TARP a “revolving fund.” If taxpayers are ever paid back by AIG, GM, Chrysler, Citigroup and the rest, Treasury believes it has the authority to spend that returned money on new adventures in housing or other parts of the economy.

Treasury and the Fed would prefer to keep TARP as insurance in case the recovery falters and the banking system hits the skids again. But the more transparent way to address this risk is by buttressing the FDIC fund that insures bank deposits and resolves failing banks. The political class has twisted TARP into a fund to finance its pet programs and constituents, and the faster it fades away, the better for taxpayers and the financial system.

Amen to that. But this administration is not about using existing programs (FDIC, Medicaid); it’s about funneling hundreds of millions of dollars to favored industries and companies. And punishing the unfavored.

On a related note, I wonder if it’s just coincidence that the one automobile company that didn’t take a penny of bailout money is about to turn a profit?

Indeed, Ford has managed to gain momentum during this historic recession. It has distinguished itself as the American automaker that proudly passed on taxpayer assistance. Through the first half of the year, Ford even eked out a profit of $834 million, although much of that was because of special onetime charges.

During the past two weeks, at least three Wall Street analysts have raised their estimates for Ford Motor Co.’s third-quarter financial results, with one, JP Morgan’s Himanshu Patel, estimating that Ford would report a profit of 16 cents per share for the July-September period when it reports results next Monday.

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