President Bush pushed the Troubled Asset Recovery Program (TARP) through the Congress because he and Treasury Secretary Paulson convinced the nation of two propositions. The first was that credit markets were seizing up and this program was the necessary remedy. The second was that the funds would only be used with respect to protect the financial system, and in no case would the funds be used to bail out individual, non-financial firms.
I supported the President based on the reality of the first point, and the promise carried in the second. The financial markets were in dreadful shape, and still are though perhaps less so, and TARP funds deployed to date likely played a role in keeping markets functioning.
On the second point, the President and Secretary Paulson are exploring the possibility of using a big chunk of TARP funds to prop up the shrinking three Detroit automakers for a few weeks. Proposing a toothless bailout in legislative form was bad enough, but thankfully enough Senators rose up with a resounding “NO”. But now the President is actively considering the use of TARP funds to achieve the policy that failed in the Senate.
That this policy is wrongheaded is bad enough. But particularly galling is for the President and Secretary Paulson to default on their promise.