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  • Morning Bell: Time to End the TARP Bailout Parade

    Senate conservatives last week waged a hard-fought and principled battle to protect both U.S. taxpayers and the integrity of the free market against the Washington establishment that favored a government bailout of General Motors and Chrysler. By late Thursday it appeared they had won. But within hours of the end of negotiations in the Senate, the White House undercut conservatives by announcing it would consider using taxpayer money from the Troubled Assets Relief Program (TARP) to bailout the Detroit automakers. Sadly, this wasn’t the first time the White House felt entitled to use TARP funds in a manner inconsistent with how the program was sold to the American people. TARP has morphed into political slush fund and now is the time to end this program by canceling further Treasury authority to allocate funds.

    Even assuming the the purest of motives and perfect application, the justification for TARP was always precarious at best. As a cardinal principle, the federal government should not intervene to save firms from the consequences of bad business decisions. But in rare cases, a second principle comes into play: When the basic functioning of a market is breaking down, with potentially disastrous consequences for the entire economy, there can be a case for government to act to help restore a functioning market. The accelerating turmoil in the financial markets in the early fall, with the prospect of the entire credit system seizing up and a spiraling economic collapse, provided an urgent case to apply the second principle.

    At that time, it appeared the critical step was for the U.S. Treasury to purchase “toxic assets” (consisting of mortgage-backed securities of uncertain value) so that credit markets could function smoothly again. TARP was created to address this necessity. Treasury has since concluded that the purchase of toxic assets is no longer practical and has embarked on a troubling pattern of potentially harmful ad hoc policymaking and mission creep. A major example of this was Treasury Secretary Henry Paulson’s announcement on Nov. 12 to suspend the original purpose of TARP and to use flexibility granted under the law to explore a wide range of alternative uses of the funds, from guaranteeing securities backed by student loans and credit card debt to using TARP to refinance problem mortgages. This step confused markets, reintroduced uncertainty into the pricing of mortgage-backed securities, and triggered a lobbying frenzy for ever-more “flexible” uses of the TARP funds.

    The only way to prevent further misuse of the program is to end it. Congress should not only say “no” to any request to use the second half of TARP funds, but it should repeal TARP entirely. Specifically, the authority to spend the second $350 billion of TARP funds, and any remaining uncommitted funds from the program’s first $350 billion, should be revoked. Huge dangers still remain in the financial markets, but the Federal Reserve has sufficient existing powers to address short-term dislocation in the financial system. Congress should also investigate the origins of the crisis, including the role of private entities like the credit rating agencies as well as the role of government institutions like the Fed, the Securities and Exchange Commission, Fannie Mae and Freddie Mac. Government will always have a role ensuring a free market system, but TARP is hurting, not helping, that cause. It must be eliminated.

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    22 Responses to Morning Bell: Time to End the TARP Bailout Parade

    1. LVKen7@Gmail.com - says:

      The

      "hard-fought and principled battle"

      the

      "Senate conservatives"

      "waged"

      was NOT TO –

      "protect both U.S. taxpayers and the integrity of the free market"

      BUT WAS TO PROTECT THE FOREIGN AUTO MAKERS THAT HAVE PLANTS IN THE SOUTH.

    2. Don Miller, Houston says:

      I would think that it would be a better idea to let Fanny / Freddie and the rest of their ilk, fail and invest the bailout money in more solidly run institutions. These, well managed instituions could then pick throught the remains left over and all would be well.

      But I supose if that happened then full disclosure would occur, leaving many of our poloticians and their appointees exposed for their part in this mess.

      Just a thought

    3. mike hutchings texas says:

      this should come as no bolt out of the blue. go back and examine the timeline of the presidental election and you will find that when sarah palin looked as if she might pull out a win the white house piled bailout/ wallstreet/ economic collapse on top of her efforts and covered by the press(drive by media)they made her into tina fey and a running joke. let me not be to blunt lest i offend but the white house worked aganst conservatives then so do not be surprized now.that is what conservatives face and they need to define who they are and what the republican leadership is not. honestly the republican leaders do not want to win but want to retreat back to the old days before reagan and be polite losers.build a conservative block on the outskirts of the main party if needs warrant but dont be pulled into this trap and contemplate being reconstructed into the GOP they do not want you. so face reality and start there

    4. L. Bogue says:

      When I heard all the automakers on average make $150,000 a year – that did it for me. I don't know if this includes their perks or not. Unions are killing this country with their demands, but are they ever secretive about what the union salaries are including the union bosses themselves. Why isn't this information published – is it because the media belong to unions? It would be interesting to find out.

    5. Maria Folsom, East G says:

      "When the basic functioning of a market is breaking down, with potentially disastrous consequences for the entire economy, there can be a case for government to act to help restore a functioning market." What nonsense. The 'basic functioning' of the market never broke down. It has been distorted by government interference. The only 'case' for government action in this situation should be for government to GET OUT completely. Laissez faire. The market is not broken any more than the weather is broken. Big government imposition is the cause of our problems.

      As you correctly write, TARP should be ended.

    6. William Wynne says:

      Perhaps Mencken said it best:

      "For every complex problem there is a solution that is simple, elegant and wrong."

      or Samuel Daniel:

      "While timorous knowledge stands considering, audacious ignorance hath done the deed."

    7. john russell mi says:

      Morning Bell, It seems to me that even though we all know that tarp is another failing government policy we are powerless to change course from the destruction of the U.S.A. as we used to know it.

    8. David Flood, Western says:

      We can all expect that the next in line for bailout $$$ will be the most poorly managed state governments like NY and CA. If we demand that execs in the auto companies resign or change their business practices, we darn better well ask the state govts to renegotiate their union contracts and make serious adjustments to the profligate medicaid benefits they make available. All of these changes need to be made before we give the states one dime of the federal govts money.

    9. Michael J O'Bri says:

      This White House sadly has left the American people with copious difficulties for the future. An unfinished war in Iraq, failure to find Bin Laden, an economy that is wrecked, and deficits and national debt that places our national security at risk. Mr. Bush and team have kept us safe and that should be recognized. However, its propensity to spend recklessly and irresponsibly is befuddling and bewildering. Over the years Mr. Bush championed 2 farm bills that cost the taxpayer some $600 bn, to companies that were already profitable, promoted an immigration proposal that would cost taxpayers trillions, and failure to address the coming tsunami called entitlements of some $35 trillion. This is in addition to previous stimulus and home owners bills that cost the taxpayer $600 bn. This is beginning to add up. Now, Mr. Bush wants to use the TARP as his personal bank account and bail out the big 3. This reason as stated by Mr. Cheney is that they do not want this administration to be remembered as a “Hoover type administration”. Au Contraire, it will be much worst. Additionally, Mr. Paulson now believes it is he and his team that can spend the taxpayer’s monies without the approval of congress. The heritage is correct about the financial bailouts; they were indeed needed for many reasons. The big 3 is another issue: now is precisely the time when demand for their product is weak that chapter 11 reorganization makes economic and operational sense. It’s a shame and scam to the American people that the treasury can act alone, and the White House can change the rules in mid stream. It will all come back to us, the taxpayer who will be dealing with huge deficits, and a national debt close to our GDP, that our kids and their kids must pay off. Forget about completely destroying our free market system. The TARP is now political, the very thing that Mr. Paulson and Mr. Bush said it would never become. Write your representative.

    10. Chris Mraz-sacrament says:

      I listen to Hannity and read this column daily. I sure wish that this column would send links for petitions when these crazed government officials abuse their power and our money. Hannity always give the links on air but Im usually driving at the time. Just might help to get a more unified approach against the radicals.

    11. Van says:

      Contrary to what people post and hear the wage differences are actually close between Toyota and the Big 3. On top of what is not reported below is the added cost to employees of the Big 3 is $1.25 per hour worked goes for their own medical insurance. The disparity between the two companies comes when reitiree health insurance comes into play because their are so many on the reitrement roles from years past when there were no Japanese transplants.
      http://www.detnews.com/apps/pbcs.dll/article?AID=

    12. Pingback: » Morning Bell: Time to End the TARP Bailout Parade Joe Biden On Best Political Blogs: News And Info On Joe Biden

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    15. HR Waltner, Duluth, says:

      No More Bailouts! We taxpayers are sick of the Federal Government interfering in the free market. Let these multi-billion corporations succeed or fail on their own merits. They need to restructure their debt and renegotiate their Union Contracts to be competitive with the foreign automakers. That's The American Way!

    16. MIKE, PENSACOLA, FL says:

      The only role of government is to protect the rule of law. Nothing more.

    17. Barb -mn says:

      Yes, I agree. The only role of government is to protect the rule of law. But the government is changing that rule everyday to, not the people's advantage, but their own. We are being taken over, compliments of senator obama.

    18. Discusted says:

      Michelle Obama said she was ashamed of the USA, I'd like for her to explain!!! I am so sad for our great country for what all of the Liberal "THUGS" have done to our great Nation under God! I want my country back, if anybody wants to do great things about taking her back and really speaking up, I am soo ready to start being heard! " All that is necessary for evil to triumph, is for good men and women to do nothing at all!" Lets really start being heard! RSVP

    19. david richfield says:

      You all grew up in a liberal American, thanks to the fights of many Americans to establish the power of labor at the bargaining table, and FDR, who saved capitalism in the thirties during the first republican depression.

      Without unions, you wouldn't even exist.

      Or, your grandfathers' and fathers' and your wages wages would all have been and would currently be those of the service industries, which is where they are currently headed if you all get your Xmas wish to destroy the UAW.

      1850's Britain, and a dead Tiny Tim.

      28 years of trickle down reagan voodoo bullshit economics are to blame for our current republican depression.

      …just own it.

      you thought it up, and you've supported it all along.

      If you guys succeed in destroying the UAW, you will be sawing off the branch upon which you sit.

      The social contract of FDR, and the unions,is how you have personally have been sponsored into American society.

      Your whole lives,

      You've driven on public roads,

      been educated in public schools,

      been protected by public police, fire, and armed forces,

      you've maybe worked for companies who mostly tie up our publicly funded courts with their patent issues

      and hire employees who are also transported, educated, and protected by the exact same Publicly funded COMMONS.

      It goes on and on.

      Face it.

      You are a product of Socialism.

      And you are trying you best to kill your own FATHER.

      The socialist PO works great.

      The VA needs 2% to run it.

      (Unlike any corporation, which uses 15-18% for admin.

      Then pays off ceos with 800+x what the grunt makes,

      and, don't get me started.)

      Medicare is very effective and popular.

      Social Security is going to be fine, once we force those who make over $97,000/year to actually pay beyond one person for their use of Social Security.

      I know you think you know best for America.

      But you don't.

      D

    20. Paul Provenzano says:

      Our government is broken to the point of no return,I believe the only thing that will save our country is the second amendment. It is obvious now that we work for our government,and our government does not work for us. When the voice of the people no longer matter such as in this bailout,obviously the government has become a self entity which has no concerns for the people it is suppose to work for.

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