• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Exit Strategy or Entrance Strategy? New TARP Program On the Way

    One year and a week after Congress enacted legislation creating the $700 billion “Troubled Asset Relief Program,” the Treasury Department next week is expected to launch its first initiative to buy, well, troubled assets. Odd as it may be, in the year since its creation TARP has been used for just about everything but the original purpose of buying troubled, or “toxic,” mortgages and other securities from financial institutions.

    Now comes word that a long-planned Treasury program to acquire assets will be ready to begin. That’s bad news. Not only is the program flawed, but the emergency that spawned it is over. TARP should be ended, not further implemented.

    The new program, known as the public-private investment program (“PPIP”), was first announced this March. Much scaled down from its original version, it provides for the purchase of troubled securities by pre-approved money management funds, using private capital matched by TARP funds and non-recourse loans. The net result: taxpayers and private investors would share equally any profits from purchasing troubled securities, but taxpayers would bear more of the downside risk of loss.

    The program was questionable from the beginning (as discussed here), and is even more so now. TARP was enacted as an emergency measure to forestall a breakdown of the financial system. Today, that system, while still weak, is not near to breaking down. Even if it were, the amounts involved in this new program are too small to make a significant difference (about $12 billion is available so far), but large enough to skew markets and enrich a few people smart enough to take advantage of its provisions.

    Instead of focusing on new and improved TARP programs, the Obama Administration should be working to end it. Under current law, authority to commit funds from the $700 billion TARP kitty expires at the end of this year, unless Treasury Secretary extends it for another year. Secretary Geithner should make it clear that he will not do so.

    But the TARP exit strategy should not end there. The Administration also needs to set out clear plans for the expeditiously return of the federal government’s outstanding investments. This should include firm, and short, deadlines for the sale of enterprises such as General Motors, which have been fully or partially nationalized. And if the Administration does not act, Congress should not hesitate to step in. Legislation to set deadlines for denationalization has already been introduced by Sen. John Thune of South Dakota.

    The crisis aspects of the economic downturn and the related concern over troubled assets that led to TARP are long past. Whatever its initial benefits, if any, the program has left a legacy of economic distortion, dependence and debt that will take years to heal. And yet another variation on TARP is set to begin. The Administration — or Congress — should instead end TARP, and establish a clear plan for the return of the taxpayers’ investment as fully and quickly as possible.

    Posted in Economics [slideshow_deploy]

    8 Responses to Exit Strategy or Entrance Strategy? New TARP Program On the Way

    1. Bobbie Jay says:

      Government driving the dollar down DELIBERATELY. This is not the government of America, THIS IS A TAKE-OVER! AS congress remains idle, the people MUST RISE UP!

    2. Elmer Ackerman Garl says:

      The government has no right to take over any business. This sounds like creeping Socialism.

    3. Linda Carlsbad, CA says:

      Yes, look at all the good they did! NOT! They have used this excuse to take over our car companies, steal car dealerships, undermind bond holders! It is time to end this tarp program and sell the companies back to the American People! Will they do that, NO, they want everything in America to belong to the government! Who are these people running our government, not Americans!

    4. Louis L Cesar F Levy says:

      All three above are Right. But what WE THE PEOPLE need is TO START see HOW TO BE ABLE TO DO. Nobody can help us but we if we wake up and UNDERSTAND what is happening. This ENDE-AVOR to take over is just starting, but we have to be ALERT and READY to Actively Stand and Act for our country SALVATION.

    5. Leon, Durango, CO says:

      TARP was the first example of our new non-representative government, how Legislation has been created without time for Congress to read the Bill, let alone truly represent their constituents. It is clear to me that our New World Order government is no longer a Representative Democracy as called for in the Constitution. If our "representatives" cannot read the legislation then it has short circuited representation. Fascism is not a 'republican' form of government required by the Constitution. Therefor our government is criminal, de facto and it is not valid under the Constitution. Those who do not want to pay taxes anymore might use this defense, the government is no longer authorized to collect taxes because it is no longer a Constitutionally recognizable authority.

    6. Lynn B. DeSpain says:

      Without TARP, Obama cannot pay his Czars! That is the only source of funds availble to him for their paychecks. Congress knows of no other!

    7. Ham Lake MN says:

      STOP YOUR CRYING!!!!! The plan is simple, destablize the US in everyway the Marxists can, then good-bye America. They are counting on us to be weak, to sit at our computers and type, listen to talk radio, watch Glen Beck on TV, …. but not do a dam thing!

      Talk will not solve this, only action will.


    8. Pingback: TARP: It Couldn’t End Thune Enough | Conservative Principles Now

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.