Extension of TARP

The Treasury's decision to extend TARP to October 2010 could be seen as a signal of the ongoing weakness in our banking system or the self-perpectuation instinct built into every government program.  Given the record profit on Wall Street, and the continue process of bank closings, without apparent ill effects on the economy, my guess is the latter explanation holds. Look next for attempts to make TARP a statutory appendage of Treasury.

Telling is the statement from Geithner that even though $700B is authorized, only $550B might be spent. Why keep a $150B rainy day fund?  This is the type of excuse corporations give to shareholders for keeping large sums of cash. According to free cash flow theory (c.f. Professor Mike Jensen at the Harvard Business School) managers now have free rein to spend money without oversight.

Treasury should go to Congress each time it wants more money.  The extension of TARP and the built-in rainy day fund is a way around Congressional oversight.  Treasury should return this money to the rightful owners - you and I, the taxpayer.