There are a few innocent reasons why someone would think that banks should not repay TARP loans. [h/t Instapundit] Unfortunately, there is one big, sinister reason for opposing repayment: Banks that repay TARP money can refuse government controls such as forced investment and compensation caps.
One doesn’t like to infer malice where mere incompetence will suffice, but the federal government is now completely controlled by people who hold an ideology that says that more political control of private enterprise is a good thing. Why shouldn’t we work from the assumption that they will use any excuse to maintain such political control?
5 thoughts on “When Any Excuse Will Do”
Unfortunately, there is one big sinister reason for opposing repayment: Banks that repay TARP money can refuse government controls such a forced investment and compensation caps.
Hence the reason for forcing Wells Fargo to take TARP money.
It was never about economic recovery and was always about control, from the very beginning. Never let a good crisis go to waste.
This is very dangerous.
Political control over a business entity essentially assures demise of the enterprise. Business decisions made by politicians will not be profitable or will be directed to advancing the cause of the political party in power.
Danger Zone Here!!!
Lack of controls has got us into the mess. There is not a legal bank in the nation that is not subject to some govt controls, oversight–if so, they are not insured by the govt (FISA).Audits required.
what “got us into this mess” was a combination of lack of one type of control with too much of other types. The type of control we need is ENFORCED TRANSPARENCY — we need to know exactly what products are being sold, what they consist of, etc. Consumers/investors need to know what they’re actually paying for, but the government allowed banks to hide too much of that. And the types of control we didn’t need that caused this mess were DE-FACTO GOVERNMENT INSURANCE of Fannie and Freddy distorting risks and therefore prices, QUOTAS that forced businesses to make loans to unqualified people, and other PERVERSE FINANCIAL INCENTIVES from the government that led banks and individuals to squander resources for the sake of tax breaks and such.
We need “oversight” in the form of audits, enforced transparency, etc. What we don’t need is the government trying to micromanage. Most senators aren’t fit to manage a Burger King; the whole Senate certainly isn’t fit to manage our financial industry as a whole.
One could imagine a banking system without massive government interference. But we have never had such a thing in the US.
The national bank system was started to finance the civil war for the Federal Government. Creating a stable system took a lot more government interference, including the Federal Reserve (1913), Federal Deposit insurance (1933), the other new deal legislation of the early 1930s, the S&L bailout of the 1980s, and … .
The mortgage market, that was the locus of the first wave of implosion, is an entirely governmental creation. Many authors on this blog and at other venues have pointed out the key roles of the “Community Re-investment Act” and the GSEs in the current drama. But the involvement is deeper than that. The whole business was created by the government for political purposes.
All of this history is meant to demonstrate that the dispute over TARP is one for domestic relations court not for some more formal arena.
If the banks pay back TARP money, are they going to redeem the notes they sold over the last 6 – 8 months with Federal Guarantees. What about the money the Feds fronted to AIG so they could pay the Banks on the CDS the Banks had bought from AIG?
I am not trying to justify letting Congress set salaries. Congress should mind its own business, or better yet, adjourn sine die. I am trying to say that the ties between the banks and the government are deep and organic.
The banks and the Federal Government should try to get out of each others knickers. That government which governs least governs best. And the current one has tangled itself up in a horrible mess. But the solution will require careful untangling.
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