The Practical Realist

Tim Geithner made the Sunday morning talk show circuit yesterday, making his case for the way the administration is handling the ongoing financial crisis. When he went on ABC’s program with George Stephanopoulos, he revealed that the Treasury thinks it has $135 billion left in uncommitted TARP funds. This was news to George, since his own fact-finders estimated there was only $32 billion remaining. The discrepancy, according to Secretary Geithner, was explained like this:

“Now that, that estimate includes a judgment, a very conservative judgment, about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession. But that’s a reasonably conservative estimate. And it gives us, and this is very important, substantial resources to move ahead with this broad based sweep of initiatives to help get the financial system back in the business of providing credit.”

Now, that to me triggers major alarm bells when I hear it. What it means is that the taxpayer isn’t going to be made whole when the money starts coming back. Instead of returning as revenues for the federal government (thus reducing our need to tax or borrow), the Treasury clearly expects that any repayments can be used for continuing bailouts.

To put it another way, the $700 billion TARP program is changing once again. Apparently, that money is going to be re-distributed over and over until the Treasury finally can’t get any of it back (at which point it’s time to ask Congress for more).

Honestly, I haven’t read the TARP authorization (but hey - hats off to anyone with that kind of time!), so I have no reason to doubt the legality of what the Treasury is doing. But we were sold something different. We were told that this huge allocation of taxpayer money wasn’t so much a spending spree as it was a bad investment. Sure, all but the rosiest projections assumed we would lose some of that money, but we’d get most of it back in the end, and in return we’d save our banking system. But so long as every dollar that DOES come back returns to Treasury rather than the taxpayer, it’s just a countdown until it’s gone.