TARP Will Be With Us A Little Longer — For Good and Bad

I have it on good authority from Hill sources that Treasury Secretary Tim Geithner will send Congress the letter tomorrow morning that will extend the Troubled Asset Relief Program through October 3, 2010.  There’s no surprise here, except the precise timing and that some deficit hawks and bailout opponents had raised hopes that more deficit reduction was on the way.  The timing is necessitated by the need for the House to find $10 b. to pay for the financial reform bill, H.R.4173.  When the House Rules Committee finishes its work tomorrow, that bill will reduce the $700 b. TARP authority to $680 b., which at a 50% rate under the credit reform scoring rules will yield the requisite $10 b.  When the House jobs bill is tacked onto the defense appropriation conference report next week, TARP will be reduced just enough to pay for that too.

As a former Hill economist, I can understand the temptation to pass important legislation without going through the normal appropriations process, which might kill it.  We desperately need financial reform and more jobs.  Whether we get what we’re being asked to pay for is the issue. Once you start using TARP as a slush fund, eventually you’re not going to like what you “paid for.”

About Pete Davis 99 Articles

Affiliation: Davis Capital Investment Ideas

Pete Davis advises Wall Street money managers on Washington policy developments that affect the financial markets. President of his own consulting firm since 1992, Davis Capital Investment Ideas, he draws on 11 years of experience as a Capitol Hill economist with the Joint Committee on Taxation (1974-1981), the Senate Budget Committee (1981-1983), and Senator Robert C. Byrd (1992). He worked in the House and Senate, and for Republicans and Democrats.

Davis brought the first computer policy model, the Treasury Individual Income Tax Model, to Capitol Hill in early 1974, when he became a revenue estimator on the Joint Committee on Taxation. He formulated the 1975 rebate, the earned income tax credit, the 1976 estate tax rates, the 1978 marginal tax rates, and the Roth-Kemp tax cut. He left Capitol Hill in 1983 for the Washington Research Office of Prudential-Bache Securities, where he advised investors for seven years.

Davis has long written a newsletter on the Washington-Wall Street connection for his clients; Capital Gains and Games is his first foray into the blogosphere.

Visit: Capital Gains and Games

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