More on TARP’s social engineeringby Tim Manni
The NY Times has a somewhat different look of the implications of banks taking TARP money than the article we blogged earlier. As the Times puts it, the list of demands from the government keeps getting longer:
Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens.
As public outrage swells over the rapidly growing cost of bailing out financial institutions, the Obama administration and lawmakers are attaching more and more strings to rescue funds.
The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say, but others say the conditions go beyond protecting taxpayers and border on social engineering. …
One of the biggest concerns of the banks is that the program lets Congress and the administration pile on new conditions at any time.
The article cites some bankers who took TARP money but now are debating whether to return it. Government requirements to do loan modifications, for example, “could prompt some institutions to take steps that could lead to greater losses.”
In that regard, some see echoes of the 1990s when Fannie Mae and Freddie Mac were mandated (by Congress and their regulators) to buy riskier loans with the goals of increasing homeownership — and we know how well that worked out.
On the bright side, we’ve seen the end of the parade of TARP supplicants who once had their hands out for some ‘free’ money.