Saturday, April 04, 2009

Okay, Obama is Scaring Me

So all the banks have received all sorts of government cash in the form of TARP (Troubled Asset Relief Program) funds. Even for those banks who didn't really want the money, the administration basically threatened them into taking it. To what end?

Control. If a bank is sitting on millions or billions in government money, the government then has the power to dictate how that money is used.

But what if a bank wishes to give back its TARP allotment? With interest? Good idea, right?

Not to the Obama administration.

From an article in the Wall Street Journal:
Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics.
So now the government can assume nearly unlimited control over banks forced to hold onto government loans that those banks don't want. It's heavy-handed politics at its far.

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