The Issues with TARP

Yesterday, Congress expressed outrage at Northern Trust Corp. for sponsoring a golf event after having “received” funds from the government under the TARP plan. The company maintains they were asked to take the money by the government and did not seek the funds. This presents some interesting issues for both the Congress, businesses, and the taxpayer:

1. 1. While everyone can agree that we don’t want to see taxpayer dollars frittered away by companies that needed help under the TARP program, I’m not so sure we can demand that companies that were asked by the government to take money not use that money in a manner that was consistent with how they ran their business before they received the TARP funds.
   

2. 2.Members of Congress (specifically Barney Frank), have called for Northern Trust to immediately pay back the funds equal to an amount they spent on this golf tournament. When did Congress start to believe they could influence a company in this manner? Oh yeah, it’s when they forced the company to take money it did not ask for.
   

3. 3.There are banks that received money from TARP that did not want the money. They were strong armed by the Bush administration into taking this money and want no part of it. It seems apparent now that this was in an attempt to limit the way the American public would see Citigroup’s receipt of TARP funds. But the bigger issue now, is that the government will not allow these banks to pay back to funds without raising the money privately. So you have banks with tens of billions of dollars sitting in reserve for the time they will be allowed to pay back this money to the government. Meanwhile, they are forced to pay interest on this money - that seems like extortion to me.
   

In the end, TARP will be judged for what it does for the economy. Given that Congress and the previous administration gave the money out with no strings attached, it is absurd for the current administration to put strings on money that banks did not want in the first place - especially while not allowing the banks to pay the money back and run themselves as they see fit.

If Congress continues to try to interfere in banks day to day operations, we will see participation in TARP drop which will be detrimental to the recovery of our economy.

Wake up Congress, give the money to those who need and ask for it. Don’t continue to force your will down on healthy banks.

Bamf