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“Creating a permanent TARP”
James Gattuso
Washington Times
March 25, 2010
Creating a permanent TARP
Stated Goal of Dodd-Frank: End Bailouts
“Supporters argue that the plan (Dodd Frank) would end “too big to fail”)
and prevent future taxpayer bailouts of financial institutions. “
Problem With Legislation: Institutionalizes Bailouts
“Those are fine goals, but there’s one problem: The plan would do nothing
to achieve them. In fact, it would extend ‘too big to fail’ while in effect
creating a permanent bailout program.”
Creating a permanent TARP
Features of the legislation
The bill would create:
1. Consumer Financial Protection Bureau
2. Financial Stability Oversight Council
Creating a permanent TARP
Financial Stability Oversight Council
“The idea is to stop firms from presenting a danger to the system as a
whole. But no one really knows how to identify systemic risks in
advance.”
Guaranteed government protection
Identifying troubled firms would effectively tell investors that the
government will ensure they will not fail.
$50 billion fund
“$50 billion fund to be used to help finance these forced liquidations to
soften the blow for some creditors. Supporters say this funding would be
used only in the rarest of cases. Nonsense. If governments have access to
money, they tend to use it.”
Creating a permanent TARP
A better Way to manage Financial Crisis: Allow for Failures
“The focus should be on establishing an effective bankruptcy system for
large financial firms to allow failures to be addressed in the same way
failure is addressed in other industries.”