The TARP: Just another government fiasco

Today's Financial News - Posted November 7, 2008

The federal government does not have a strong reputation of getting things done. When it dives into a big project, a handful of folks get rich and the rest of us suffer. The $700 billion bailout is turning out the same way.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): We all knew it was nothing more than a matter of time. When Congress passed its monumental bailout bill filled with page after page of controversial add-ons, there were very few investors that thought the plan would go off without a hitch.

After all, when the federal government does something monumentally important, it does it with the speed and efficiency of a drunk, three-legged elephant.

The Treasury Department’s Trouble Asset Relief Program (TARP) was created to pull the nation’s banking and finance industries from the unrelenting grasp of overleveraging and greedy back scratching. By throwing $700 billion into the “free” markets, everything was instantly supposed to get better.

We all know it does not work that way.

When Washington gets involved, intelligence is put aside and politics rule. That is exactly why so many of the companies that would greatly benefit from the TARP are doing whatever it takes to stay out from under its ominous shadow.

Shhhh… it’s a secret

One of the biggest criticisms of the program is the Treasury Department’s method of choosing the companies eligible for assistance. Investors and corporate executives are claiming Henry Paulson and his troops have the overly powerful position of choosing what companies will survive and which will fail.

Worst of all, companies have no idea what it takes to make it onto the winners list and into the nation’s future “industrial plan.” The Treasury has been keeping its methodology under wraps, believing it will create greater flexibility. In reality, all it is doing is stirring controversy.

We are less than two months into the heart of this financial fiasco and already the government’s hands-on approach is starting to backfire. Mistrust, political greed, and even corruption are all starting to appear in the TARP’s unraveling.

Even worse, many of the folks that created the plan will not be around to see it fully implemented.

When Obama puts his hand on the Bible (or as many want to believe, the Koran), he will bring with him a new Treasury secretary and a whole host of fresh financial staffers. Their interpretation of the new laws and regulations will likely be entirely different than the current administration.

Financially uncertainty is the arch nemesis of every Wall Street investor. It creates fear and speculation, and ultimately leads to lower valuations.

If Washington truly wants to get us out of this mess, it must act quickly and decisively. So far, there are no signs of that happening anytime soon.