Another clue

Sometime readers of NP will recall that in the past we asked several times what would happen to those TARP funds (and any extra made on the deals) once the repayments began.

Congressman Barney Frank offers a clue which fits in with what we thought might happen:

When President Obama announced on June 9 that some financial institutions would be allowed to repay Troubled Asset Relief Program dollars, he said the massively expensive TARP bailout had made money for the federal government. "It is worth noting that in the first round of repayments from these [TARP recipients], the government has actually turned a profit," the president said. Indeed, TARP supporters have long held out the hope that the program might be profitable.

But now Rep. Barney Frank, the chairman of the House Financial Services Committee, has come up with a proposal to spend any TARP profits before they can be returned to the taxpayers. Last Friday, Frank introduced the "TARP for Main Street Act of 2009," a bill that would take profits from the program and immediately redirect them toward housing proposals favored by Frank and some fellow Democrats.

As we mused in early April:

One can easily imagine a scenario under which the banks get the screws put to them so tightly that they will not only subscribe to the terms above but also the creation of some new, and permanent, set of governmental programmes which dole out the repaid TARP funds, or a big enough portion of them, for all kinds of social re-engineering programmes. The governmentalist mindset will think, "We created this new money, why waste it by simply closing out the TARP programme?"

The banks of course will line up squealing with praise for these new programmes and the need to use these repaid TARP funds for the "better social good". And why wouldn't they line up to do so, they will have repaid the TARP funds and removed the government substantially off their backs. The fact that some new social re-engineering programmes have been created and foisted onto the tax-payer in perpetuity makes no difference to the banks, they got rid of their problem.

We continue to watch but appreciate Congressman Frank for starting the process which may confirm our fears.