Understanding Government

In order to pay for financial regulatory reform, Congress transferred what funds remain from the Troubled Asset Relief Program a/k/a TARP (a/k/a the $700 billion bailout of Wall Street marked by its unpopularity — and success in stabilizing the financial market). Paul Merrion of Crain’s Chicago Business reports that this is unlikely to affect banks that have applied for TARP money, such as Chicago’s ShoreBank.

ShoreBank raised $150 million from Wall Street titans like Goldman Sachs but still needs $75 million in TARP cash to avoid a takeover by the Federal Deposit Insurance Corporation. The legislation ending TARP reads that programs “initiated prior to June 25, 2010″ would be allowed to continue. But people on Capitol Hill whom Merrion interviewed differed as to whether “initiated” means the Treasury Dept. appropriated funding or a bank applied for funding. A Treasury Dept. official, though, says that ShoreBank, by applying before June 25, is still eligible for funding.

So — one way to understand this is that Congress killed TARP with members oblivious as to how it might impact community lenders. Another way is that the dramatic-sounding fiscal austerity measure of killing TARP is largely without meaning — if Treasury continues to shell out new money to banks. Such legislative action adds to skepticism about whether Congress knows what it’s doing when it comes to economic recovery and reforming the financial sector.