The Never Ending TARP Slush Fund

Conn Carroll / October 21, 2009

This afternoon President Barack Obama announced that his administration would shift TARP’s $700 billion bailout fund away from big financial institutions and toward small businesses through small banks.Specifically, the Treasury Department will offer capital from TARP, at a 3% rate, to viable banks with less than $1 billion in assets. These small banks must first submit a plan explaining how the capital will allow them to increase lending to small businesses.

But remember that TARP was originally sold to the American people as a way to protect the economy from the systemic risk posed by the collapse of firms that were too big to fail. Small businesses and small banks are by definition not too big to fail.

First under the Bush administration and now under Obama, TARP has become a slush fund for pet political priorities. And as the New York Times reports, this time it is even being used to influence votes in Congress: (more…)