Remember last fall, right in the middle of the Presidential campaign, when we were told that the TARP bailout was absolutely necessary to prevent a total collapse of the financial markets? We were told that it could actually be profitable for the taxpayers. We were told that the money would be used to purchase toxic assets at huge discounts and that those assets would later be sold to make a profit. All this was necessary to keep the Banking System from collapsing.
There were no strings attached to most of the money that was funneled into those institutions. As large bonuses began being paid out, along with some extravagant spending by some of these institutions, people got upset and after voicing their dissatisfaction, some strict regulations were inserted into the plan, including compensation limits for executives.
Some of these institutions began realizing the amount of control they would be giving over to the government and tried to give the money back. At first they were denied the ability to pay it back. President Obama recently announced that some financial institutions will be allowed to repay Troubled Asset Relief Program dollars. He said the massively expensive TARP bailout has made money for the federal government. "It is worth noting that in the first round of repayments from these [TARP recipients], the government has actually turned a profit," he said. Indeed, TARP supporters have long held out the hope that the program might be profitable.
Don’t hold your breath. Rep. Barney Frank, the chairman of the House Financial Services Committee, wants to spend those TARP profits rather than returning them to the taxpayers. Frank introduced a bill called the "TARP for Main Street Act of 2009." This bill proposes that the profits from the program be immediately redirected toward housing proposals favored by Frank and some fellow Democrats.
The original TARP legislation required that ALL money made from the program "shall be paid into the general fund of the Treasury for reduction of the public debt." Frank, however, wants to spend the money instead of paying down the debt. His proposal would take $1 billion from those dividends and apply it to a trust fund created by Frank for low-income rental housing. The unfunded trust was established as part of last year's bailout of Fannie Mae and Freddie Mac. In addition, Frank is also proposing to take $1.5 billion from TARP dividends for a so-called "neighborhood stabilization" fund and $4 billion to subsidize people who are delinquent on their mortgages, and to "stabilize multifamily properties that are in default or foreclosure."Spending the dividend payments now, as Frank proposes, would reduce the chance that TARP might ever be a break-even deal for taxpayers. As of June, 17 troubled institutions have not paid their dividends, much less repaid the TARP money itself. And last week, the Wall Street Journal reported that three other institutions were not paying dividends. But now, Frank is proposing that dividends be spent immediately.
Such people are not serving Christ our Lord; they are serving their own personal interests. By smooth talk and glowing words they deceive innocent people. – Romans 16:18 -- NLT
Republican critics have charged that these measures might allow federal dollars to be distributed to activist groups like ACORN (The Association of Community Organizers for Reform Now). For those of you who may not be aware, that is exactly how this whole housing mess got started.
The CRA (Community Reinvestment Act) originally drafted by President Jimmy Carter back in the 70’s was designed to “encourage” banks to lend money in lower income areas of urban cities in this country. The CRA was later expanded by both President Clinton and Bush to encourage more home ownership among minority and lower income families. To accomplish this, ACORN applied pressure to banks to make loans it would normally not make. Meanwhile, political pressure was also applied to Fannie Mae and Freddie Mac to purchase these “Subprime” mortgages from lending institutions to replenish the money supply.
These initiatives were successful in the short-term, but the risks were not properly covered because most of these “Subprime” products were not protected with Mortgage Insurance. Enter into the arena a new word into finance and investing, “derivatives.” These were premiums added onto these products to make them easier to bundle and sell. This “derivative market” is what largely caused the demise of Lehman Brothers, Merrill Lynch, and others. The Government stepped in before it took down AIG. Largely to protect all the pension funds controlled by AIG, including the one for federal lawmakers.
I could spend many more pages going deeper into all this, but won’t at this time. The main point I am trying to get across is this. There were people who were warned about this problem the first time around. They repeatedly denied there were any problems with Fannie Mae or Freddie Mac. We know where that ended up. We, the taxpayers, are now the proud owners of those organizations.
You have been deceived by the fear you inspire in others and by your own pride. You live in a rock fortress and control the mountain heights. But even if you make your nest among the peaks with the eagles, I will bring you crashing down," says the LORD. – Jeremiah 49:16 –NLT
Now these same people want to start this all over again. I guess with a $10 Trillion plus federal debt load a mere $6 Billion is just a drop in the bucket that no one will miss. Why not scrape it off and help some more pet projects of the power brokers controlling Congress. The law they themselves created less than a year ago I guess doesn’t matter. It’s bad enough they gave away so much money without any rules, but now they don’t even want to play by the rules on the rest of it. When is this total disregard for the law going to stop? Not until we clean house in Washington. Get involved before it’s too late.
Jeff Senters
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