A Recipe for Failure

The lack of transparency into the TARP program is well known and a primary source of criticism.  The Wall Street Journal has presented new information into the side deals by our elected officials that are plaguing the rescue effort. In an article yesterday, they noted the following:

The goal of aiding only banks healthy enough to lend -- laid out by the Treasury when the program began -- clearly seems to have shifted, but in a way that's hard to pin down and that the Treasury has declined to explain. Part of the problem is that some powerful politicians have used their leverage to try to direct federal millions toward banks in their home states.

One of those politicians is none other than Barney Frank, chairman of the U.S. House Financial Services Committee. According to the Wall Street Journal, Rep. Frank directed the issuance of $12 million in TARP funding to OneUnited, a small bank in Rep. Frank's home state of Massachusetts.  Just prior to issuing this money, OneUnited had been given a "cease and desist" order by the FDIC due to poor lending practices and executive compensation abuses.  In addition, the bank was ordered to dispose of a 2008 Porsche sports-car that had been reserved for executive use.  Given the depreciation of high-end sports-cars, the Porsche must have qualifed as a "troubled asset".  

Back door dealings and excessive pay practices led us into this current financial crisis.  Continuing these practices under the guise of a rescue effort will certainly doom it to failure.  Here is Rep. Frank discussing his planned bill to place restrictions on use of TARP funds.  Let's hope he includes a Porsche restriction provision in the bill.