New Plans For TARP

Posting will be lite tonight as I am moving this blog to a new platform. Yes, for those of you who have followed me around, one more move. I need to get back to Wordpress and away from Blogger. Apologies in advance.

But, I can't go to work on that without first offering a thought or two on Treasury Secretary Paulson's announcement today. The Secretary said he was scrapping the plan to have TARP buy troubled assets of banks and instead would focus on getting more consumer credit flowing. He also mentioned that he plans to use some of the money to invest further in banks provided they match the investments with a like amount of equity. Here's a link to the WSJ which has an article as good as any on this whole sorry mess.

A couple of prominent bloggers, Felix Salmon and Yves Smith seem to sense some sort of conspiracy in all of this. I suspect that theory will take hold for at least 24 hours. Ms. Smith even took a last swipe at the Bush administration, opining that this was this abrupt about face was mendacious and of a piece with her perceived deception by Bush with regard to the Iraq War. I think the truth is much simpler and perhaps more dismaying. They haven't a clue as to what to do, so their actions become progressively more erratic.

A week or so ago I wrote a post that drew on an article by an economist at George Mason University (here's the link). He pointed out that the actions of this administration are eerily similar to what went on in Hoover and Roosevelt's administrations. Program after program was rolled out in a vain attempt to staunch the bleeding. Rather than restoring calm, the endless schemes only served to stop investment dead in its tracks as no one knew for sure what the rules would be on the morrow.

Human nature is to do something, anything in the face of danger even if that something may be counterproductive. It's a rare and valuable man that can step back and say let's take a deep breath and figure this out. Unfortunately, rare men seem to be in short supply in Washington right now. Bernanke knows the numbers and a lot more about the Depression but I'm not sure he knows a lot about the tendencies of human beings and how, if left unchecked, they can lead to the poorest of outcomes. Paulson is a doer by nature and so is not suited to thoughtful action. Bush is probably content to push this over to Obama and Congress is well Congress.

No there's no grand conspiracy here. Just a lot of tired men grasping at straws.

Tom Lindmark