I thought it was to clear up so-called toxic assets. But apparently no toxic assets have been cleared up.
Signs abound that the worst of the recession is over: Stocks have been surging, the rate of job losses has slowed, so it seems that the economic apocalypse has been averted.
Government programs such as the $787 billion stimulus and last fall’s $700 billion Troubled Asset Relief Program have so far been successful, the Obama administration says.
Except, the Congressional Oversight Panel warns in its August report, TARP never actually bought any troubled assets.
“It is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today,” the panel’s report says.
Those bad assets are still there, rotting away on banks’ books, making banks reluctant to ratchet up lending, and maybe, the watchdog warns, paving the way for another financial meltdown.
Isn’t American government great?! The executive branch stampedes Congress into authorizing the former to spend an enormous amount of money allegedly to save the nation from economic calamity. The executive branch changes its mind and uses the money in other ways. The original problem remains — while the taxpayers are far poorer — presumably still threatening economic calamity. Now what?
TARP II. Don’t be surprised if the Obama administration eventually unveils a massive new program to clear up toxic assets.
The lesson? Beware government officials promising to help you by seizing your money and distributing it to a gaggle of grasping individuals and companies. Especially beware government officials demanding a second chance after wasting your money the first time!
