Back to Basics on TARP

WSJ, "Leadership and Panic":

Democrats are also insisting that as much as $100 billion go to prevent more home foreclosures, though this will have little impact on housing prices. The evidence from the last two years is that foreclosure mitigation often merely delays a reckoning because many of these homeowners never could afford the home in the first place. Meanwhile, Mr. Frank, the Dr. Kevorkian of capital injections, wants to impose new management and compensation restrictions on any institution that gets TARP money, whether it is well-managed or not. The bankruptcy "cramdown" now streaking through Congress will also impose more losses that will destroy more bank capital. [snip]

We supported TARP as a way to prevent a financial meltdown, providing public capital to help regulators manage problem banks, arrange mergers, and work off bad assets. TARP has since become a cash pool for all and sundry, casting a pall over the entire financial system. Mr. Obama would make more progress against recession if he steered the TARP back to the purpose that Paul Volcker and Eugene Ludwig first proposed on these pages -- as a resolution agency on the model of the Resolution Trust Corp. of the 1990s. Working in tandem with the Federal Deposit Insurance Corp., such an outfit could close problem banks before they collapse, serve as a holding and work-out agency for bad assets, and then sell them back over time into private hands.