Dartblog

From The Motley Fool, reporting on Secretary Paulson’s presser of today:

Paulson acknowledged that there had been criticism of the TARP’s actual strategy, which quickly became one of injecting capital directly into banks, though without demanding control in the form of board representation, or cuts in dividends, or any of the other limitations used in successful bank bailout schemes in countries such as Finland and Sweden. But he said there was good reason for handing out money with no strings attached.

“America is not Finland, and it is not Sweden,” Paulson explained. “I don’t see any of you eating lutefisk or swatting your sweaty bodies with a birch switch.”

The assembled journalists laughed, looked at one another, and admitted that America certainly isn’t Finland or Sweden. “That is silly,” said Barney Field of the New York Examiner/Picayune.

The Treasury Secretary then adjusted his bow tie and produced a cane from within the briefcase he was carrying, which seemed to disappear with a flick of his wrist. Taking long, rhythmic strides across the press room, in a candy-striped Armani suit, Paulson winked at front-row reporter Laura Wedburne and explained the vital need for a new direction for the taxpayer-funded bailout fund.

Paulson said that 40% of U.S. consumer credit is provided through selling securities that are backed by monorails, band uniforms, and other such debt. He said these markets need support.

The commentary there strikes me as head-on. The $700B TARP, aborted, is now potentially explosive. If it is to be used as a rude, crude, Keynesian spend-to-spend fund, it oughtn’t to be used at all. Taxpayers did not sign up for spreading the fallout from credit card zealousness all around. They signed up to keep their deposits safe by ensuring that their banks didn’t fail as a result of frozen credit markets as a result of a sudden decline in the values of certain underlying assets as a result of left-wing policy that spurred the construction of these assets for the sake of “helping the underprivileged.” We can deal with the political lesson—government never creates, it only spreads; and it usually destroys something in the spreading, too—later.

For now, if the job of spurring interbank and commercial lending has been accomplished—and many indicators say so—the $700B should go quietly into that dark night whence it came. Which is of course to say, your wallet.

I was in favor, originally, of a large taxpayer spend for the purpose of making targeted public investments in banks which were nearing failure. (And indeed I myself, without so much as a nod from old Hank Paulson, was making some narrowly targeted investments in financial companies.) At the moment, the plan seems to be giveaways—not investments—to credit card issuers, useless automobile manufacturers, and other assorted beggars.