In Theory: Government will hand out $700 billion in relief funds to banks and mortgage companies to stimulate the economy by loosening up lending.
Beneficiary: American public.
In Practice: Government hands out $700 billion in relief funds to banks, mortgage companies, automakers, and whoever else grovels long enough. Economy is not improved because lenders are still holding on to their money.
Beneficiary: Recipients of TARP funds.
Dallas Morning News via Michelle Malkin -
Congress and taxpayer groups have objected to using bailout funds for acquisitions and grown impatient with the lack of new lending. But the government didn’t dictate how banks can use TARP funds. And it has no system for monitoring the funds after they are handed over.
While the government can take credit for fulfilling the first part of its mission – stabilizing the financial system – it has failed to stimulate lending. Credit remains tight as banks – even those that received TARP capital – have been wary to take on risk as the economy worsens. And they are free to use the funds for less risky investments.
“Some of the banks that have received the money don’t need it but decided they would go ahead and take it since it was available,” said Robert L. Clarke, a senior partner at Bracewell & Giuliani in Houston who was comptroller of the currency under presidents Ronald Reagan and George H.W. Bush. “But it has not changed their view of the risk of making loans.”
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