Tales from Bailout Nation Pt. IX

Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times.

(italics, ours)

“S”-word, “F”-word, “C”-word…. whatever – we said we weren’t going there but, man, its tough.

But the judgment would be made in the context of the wider economic interest. He said the government had three basic tests. It needed first to “make sure the system is stable”. Second, to not create “incentives for more deleveraging which would deepen the recession”. Third, to make sure the system had enough capital to “provide credit to support the recovery”.

Again, we don’t recall any 3-step plan included in the TARP program - our bad. We thought it was originally to buy up the toxic assets the banks were holding and then, well…. then it became an effort to recapitalize the banks because they weren’t lending to one another. And now the two-time tax cheat gets to decide who can and cannot give their money back and, in effect, pick the winners and losers in this great big financial wheel of fortune.

We don’t want to go conspiracy theory on anybody here, but even supposing Geithner and his gang were the absolutely most honorable and smartest people on the planet owning unparalelled foresight and even the ability to see around corners, we’d still be highly skeptical of this whole plan. But they’re not. They’re human - susceptible to mistakes and shortcomings…. and worse, susceptible to influence, graft and corruption – a road we’e already travelled down with Congress and which was largely responsible for getting us into the very mess we’re in right now.

Then again, maybe we’re just over-thinking this and it’s all really as simple as this.