Now we know: Treasury Secretary Henry Paulson has been spending Barack Obama's TARP money to subsidize Bank of America's takeover of Merrill Lynch because both banks are much worse off than either has disclosed. This is an outrage that will inflame public opinion and Congress. Many banks have been deceptive in hiding their true liabilities, greedy in trying every trick to preserve their high salaries and bonuses, and miserly in not lending the money the taxpayers gave them to lend.
Remember when banks loaned to people? Now the people are loaning to the banks and the banks are hoarding the money. This incredible situation angers Americans from all walks of life. This outrageous situation must be ended with the full disclosure of the truth, dramatic cutbacks in compensation, and, sadly but truly, intelligently spending whatever it takes to solve the problem in ways that help the people who are hurt by this crisis and end the king's ransom paid to those who caused it.
Congress should approve the Troubled Asset Relief Program (TARP) money and a give a new president with a strong mandate a powerful tool to restore confidence in America. Congress and the president must take immediate actions to freeze housing foreclosures, demand honest accounting of bank assets and liabilities, end the massive hoarding of taxpayer money by American banks and make the hard decisions necessary to restoring prosperity to America.
The Inaugural is only days away, yet: The Democratic House threatens to vote down the TARP money. The president-elect threatens the Democratic Senate with a veto. The chairman of the Federal Reserve Board warns that major new bailouts of banks are needed. The next Treasury secretary is embarrassed by paying back-taxes. And various members want to micromanage what Obama can do with the money.
Here is the truth to power about TARP:
Because of excessive secrecy from the previous administration, mismanagement of key aspects of the program, a lack of integrity by banks in disclosing the true value of their assets and liabilities and a lack of diligence by both parties in oversight, the hard and ugly truth is that banks will need more money and the public will not like it.
Obama has promised to use more TARP money to support homeowners and consumers and no doubt he will. That is a fundamental and major improvement and both parties in both houses of Congress should take his word for this, for now.
Obama will almost certainly have to use some of this money for more assistance to banks. How much, we do not know right now. The Fed does not know. The Congress does not know. And Obama does not know.
To ask Obama to make commitments about something he does not know is to ask him to begin his presidency by not being honest. This is wrong. To try to micromanage mandates he must obey, no matter how well-intentioned, when we cannot not know the full situation within 15 days is wrong.
Here is what I suggest:
1. Give Obama the money and our trust at this one time, for this one moment. Give him the clout and credibility of a new president with a strong mandate who will send the nation and the economy a signal of confidence.
2. There should immediate, aggressive and nonpartisan accounting of the true value of bank assets and bank liabilities. No secrecy, no cover-ups, no hiding and no lying. We must begin this now and finish by a date certain, soon. We must understand the exact nature of the problem, deal with it and not let failures of the past poison our common sense of the present.
3. We must end the hoarding of money by the banks as we learn the full truth and address the full problem. We should initiate a foreclosure freeze immediately, along the lines of the Federal Deposit Insurance Corporation suggestion with government guaranteeing renegotiated loans. A freeze of foreclosures would have immediate impact and send a dramatic signal. Let’s end the Grapes of Wrath-like conditions in America.
Let’s give the new president a fast start. Let’s accept the TARP, freeze foreclosures, end the hoarding, get the truth, inform the people, solve the problem and pass a large, bipartisan stimulus to show the world that things in Washington have truly changed.Brent Budowsky will read comments at The Hill’s Pundit’s Blog.