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July 02, 2009

Barney Frank: Hey, Let's Take the Small Amount of Supposed Profit from TARP Repayments and Put it Right Into Subsidizing More Housing

I say "supposed profits" because the profits are a pittance compared to the huge TARP expenditures, and only represent profits on the first wave of repayments -- which, for all we know, may also be the last round of repayments.

Many of the repayments were made by banks which apparently didn't even need the money, but just thought they should sign up for free taxpayer cash if the government were giving it away anyhow, then repaid early because they didn't like the strings attached.

So their behavior says little about the banks that really needed TARP funds to continue operations.

Anyway, Barney Frank is ready to spend it all:

Frank, however, wants to spend the money before it can be used to pay down anything. First, the "TARP for Main Street" proposal would take $1 billion "from dividends paid by financial institutions that have received financial assistance provided under…the Emergency Economic Stabilization Act" and apply it to a trust fund that Frank has long wanted to create for low-income rental housing. (The measure, unfunded, was part of last year's bailout of Fannie Mae and Freddie Mac.) Next, Frank would take $1.5 billion from TARP dividends for a so-called "neighborhood stabilization" fund. Republican critics have charged that both measures might allow federal dollars to be distributed to activist groups like the Association of Community Organizers for Reform Now, or ACORN.

The "TARP for Main Street" bill would also spend $2 billion, apparently from remaining TARP funds, to subsidize people who are delinquent on their mortgages, and another $2 billion to "stabilize multifamily properties that are in default or foreclosure."

Frank's proposal comes at a time when Republicans, and some Democrats, are expressing concern about the continued use of TARP money. Republican Sen. Orrin Hatch recently complained that TARP funds are "now being used as a go-to solution to address all of our nation's economic ills." Hatch and Democratic Sen. Blanche Lincoln recently introduced a bill that would require that TARP money goes back to the Treasury for debt reduction.

And that is kinda how the bubble was blown up in the first place.


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posted by Ace at 04:20 PM

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