Following the government's logic on TARP is like following Mr. Toad's Wild Ride.
Because Treasury now estimates that over the next decade the TARP bank rescue fund will cost $200 billion less than what it expected in August, then the government has legitimate recourse to use those taxpayer funds for a general purpose slush fund, for whatever project it desires.
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That includes things like a massive jobs program to help preserve Congress's own jobs, even though to date the Treasury expects taxpayers will lose a lowballed $42 billion from TARP money given to AIG and the automakers.
The problem is, the $200 billion swing is the government's snapshot of the health of TARP right now. It doesn't count looming potential bank problems, where the TARP funds may be needed, and it doesn't include the rotting mountain of paper picked up in the Bear Stearns and AIG bailouts that taxpayers have been morosely staring at over at the Federal Reserve.
Because the Federal Reserve is now the world's biggest junk investor and the US government is the planet's biggest bond insurer.
Predicting the health of the banks reminds me of this quote from economist John Kenneth Gailbraith: "The only function of economic forecasting is to make astrology look respectable."
What to do with the remaining TARP funds? Send it back to government coffers, that's what you do. Don't let elected officials use your money however they deem fit.
Or, the government could replenish the FDIC Deposit Insurance Fund, so that banks do not need to pony up three years of bank deposit insurance fees by year end, as is now planned, says Richard Suttmeier of ValuEngine.com. "Using TARP would suspend bank assessments, allowing them to lend money to consumers and small businesses," he says.
Or, just replenish the FDIC fund overall, because the banks are still in pain. For example, regional banks face rising defaults on commercial property, with unpaid loans now at a 16-year high, says Real Estate Econometrics LLC, a property research firm in New York.
What Else We Should Do
Here's what else we should do.
We should make members of Congress eat their own cooking by paying their salaries in US Treasurys instead of in cash, as elected officials continue to vote themselves pay raises.
Plus we need to force all Congressmen who are lawyers to recuse themselves from the deficit-busting health bill because they won't approve tort reform.
And we need term limits to stop crony politicians--even the founding fathers cautioned we get the politicians we pay for—and also a line item veto and a balanced budget amendment, plus we should furlough Congress so they meet every other year for 140 days, like the Texas legislature.
And of course we need to get the US government off the backs of our entrepreneurs and small businesses.