Wherefore the Need to UnTARP?

As per usual, in today's WSJ Holman Jenkins delivers an incisive and clear analysis of government meddling in the economy and its ill effects, but in this particular instance I think the estimable Mr. Jenkins falls a little short. His basic thesis is this: in balancing the need to stabilize the banking system with its reluctance to take over one or more large banks that would have gone bust - a reluctance born of the fear of political meddling in the newly government-owned bank or banks - Paulson & Co. gave us the TARP program, which wound up spreading political meddling throughout the banking system, to healthy and unhealthy banks alike. The implication is that the geniuses behind TARP, Treasury Secretary Paulson being the putative jefe of financial poobahs, failed rather stunningly in underestimating the venality and recklessness of the likes of Barney Frank and Chris Dood, posterboys respectively for the feared political meddling . I think this is wrong. I don't accept that Paulson was too dumb to see the woeful influence these Sausage Factory poobahs would try to exert. I think Paulson figured that politicians would caterwaul but would ultimately be walled off from doing too much damage via the legislative process while the financial system healed.

Fast forward to the recent events that highlight the race to unTARP, the unnecessary dilution of shareholders at giveaway prices in order to get out from under TARP and the unsuccessful mating dance between Robert Kelly of BNY Mellon with Bank of America. The situation clearly is a mess but it wasn't for Barney Dodd that it is so. The real fly in the ointement came in the form of pay czar Ken Feinberg who is a creature of prolific czar appointer, Barack H. Obama. Should we really hold Paulson accountable for not foreseeing a new - putatively moderate, Volcker and Buffett-endorsed - President taking office and unleashing a wave of unaccountable czars with union pedigrees to lord over with heavy hand every industry where the federal government has injected aide? I think not. TARP was imperfect, yes. But it was good enough for government work in a tight spot. It's flaw was to allow enough of an opening for a statist-minded executive to come barrelling through that opening. Is that the flaw of the TARP designer or the statist President?? I'm giving the TARP crew a pass on this one.