Is it really necessary for taxpayers to spend another dime on the TARP?
We’ve already committed $700 billion, half of which was spent under Pres. Bush and half of which is coming under Pres. Obama. And now, as we wait with baited breath for Treasury-man Tim Geithner’s detailed plan to purchase bank toxic assets, the TARP could rise by another $1 trillion or more.
But we may not need it at all. Here’s why:
Out of the blue, bank stocks mounted an impressive rally this week, jumping nearly 40 percent on the S&P financial list. One after another, big-bank CEOs like Vikram Pandit of Citi, Ken Lewis of BofA, and Jamie Dimon of JPMorgan are telling investors they will turn a handsome profit in the first quarter, their best money gain since 2007. This is big news. And it triggered the first weekly stock gain for the Obama administration. [snip]
Here’s the second big point: Instead of spending a trillion TARP dollars to rescue toxic assets, why not ease or liberalize mark-to-market accounting rules? You see, banks still have a bunch of underwater toxic assets on their balance sheets. And unless the SEC or someone in Washington changes these rules, the banks may have to erase their new cash-flow-rich profit margins by marking down the value of mortgage- and consumer-related loans. [snip]
So let’s have a shotgun marriage. Let’s wed the upward-sloping yield curve with mark-to-market reform. It sure beats another trillion in taxpayer dough, or a federal takeover of our biggest banks.
It all seems like such a simple solution.
[Ah, but that would transfer power from government to the markets - that's 'off script' Larry - you should know better.]
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