TARP Oversight Report

What is Treasury's Strategy? Liquidate, Subsidize or Nationalize

Liquidate - Transfer depositors to other banks, fire managers and nuke shareholders
Clear and decisive, but politically tough

Nationalize - Take over, re-capitalize and reorganize - The Swedish Model
Return to private hands quickly

Subsidies - The Japan "Lost Decade" - buy bad loans with taxpayer money at inflated prices
May be open-ended, propping up banks indefinitely

Success required ALL of the above -
1. Transparency - Insist on the trust about what assets are worth
2. Assertiveness - Take decisive action to address failure - close what can't be saved
3. Accountability - Hold management accountable - replace and prosecute
4. Clarity - a clearly defined government response - full disclosure of all assistance and clear reasons for spending Taxpayer Dollars

How has Treasury done the last 6 months?
Subsidies have "failed to provide Transparency, Accountability AND Clarity."

PPIP could remove bad assets, but the complexity of the program could hurt the taxpayer and greatly benefit a few large banks.

$590 Billion of TARP spent. $1.3 trillion from Federal Reserve. Has it worked?

So far, Treasury has focused only on subsidies. Treasury thinks that the crisis is temporary. If it is not, then you have to consider "alternate approaches".

We all now know what has transpired. I think the real issue is that at some point, the amount of money being forced into the system will overtake the amount of money leaving the system (via deleveraging). At that point, we will get an economic recovery. We most likely crossed that threshold 4 weeks ago.

You can read the report here -

http://cop.senate.gov/documents/cop-040709-report.pdf