The Fed finally figures out how to take the money back

If you have been following the story of the TARP money, and the government’s quandary as to how to take their money back, then you will be gratified to know that after 4 months and several large interest payments later, our government figured out how to take money back. Ironic, as taking money from others is their primary business. It is interesting that the 10 big banks given approval to return $68 billion in bailout money had to get permission to pay back the money. Most of those banks will welcome the lack of restrictions on salaries, bonuses and other payment structures that the executives missed very much. It is good that the executives from these banks have been exposed to the bad lending practices they practiced. It is also good to see them make the same mistakes that we all make in assuming that we can quickly repay a loan and not get in over our heads. I also found it ironic that it took the treasury 4 months to figure out how to take back the TARP funds, all the while charging interest. I guess the incentive just wasn’t there.

We have a systemic problem of many people who mean well, but have a profound lack of understanding. Mr. Guithner is optimistic that we have turned the corner, while expecting over 1/3 more banks failed thus far this year than all of last year. Without revenues, the banks will not be able to function and businesses will continue to fail. The Small Business Association (SBA) has many programs but they do not control the lending. They merely “facilitate” and provide the rules for guaranteeing loans from banks. As of June 10, 2009, Bank of America has not issued a single SBA loan, while being listed as a preferred lender. The government is not able to help because the rules dictate that they cannot force someone to lend, nor can they show preference, however, they can set the rules for lending. So having a great government program is only in the imagination of the legislature. The problem lies, as always, in the execution. Not enough details are provided in the program design and there is no incentive to move quickly or efficiently to bring these programs to the public. Who would we complain to anyway, the government? Which department has oversight to government abuse and corruption other than our press who has historically been biased and unable to perform even the most basic analysis of the information they provide? When non-government organizations are irresponsible we have remedies such as litigation and regulation. Who regulates the regulators? This is why government providing services is usually a bad idea. If the government wants to save money by cutting administrators of a program and no one returns calls to those trying to access a program offered, who wins? Who would we the people turn to, and how would we find help? When the wolves have become the shepherds, it is not a good time to be a sheep.