I’m reminded of Ross Perot and the term “giant sucking sound” which in todays case is TARP. Considering the hoops the automakers are going to have to jump through, and the creation of a car czar, it makes me think we really need a TARP czar. Not a guy to hand out the money, but a bunch of guys to get into the day to day operations of each and every bank/ins co/whatever could be made to look like an bank that recieved TARP funds. Sweden nationalized their banking system during their recession, and it worked amazingly well… This throw money at the problem with no accountability otoh, is just putting more dirt in front of the giant bank vacuum cleaner.
As I expect the car czar to have no automotive nor marketing background, it would make sense to have a banking czar without a bean counter background. Granted this is sarcasm, otoh, seeing that Merkel (scientist without a lifelong politics background) is doing fairly well in Germany it may well be an outside set of eyes lacking specific arena experience may truely be the best way to go. It sure would serve to strike fear in the hearts of those who took on TARP funds, which no doubt would cause some serious short term blips stock market wise, but in the mid and long term might be better… certainly better than the brazeness of AIG and the loss of money left and right as it spirals into the AIG and others blackhole.
At a bear minimum, significant political pressure and public outrage needs to be exercised against those who recieved TARP funding. It was not supposed to work from the get go, evidence shows it is not working, and long term wise, more and more folks are seeing it to be counterproductive. In fairness though, it did work a bit, it prevented massive bank runs, and bought a few months time, and thus while a spendy lesson, did accomplish some good. Yet, we are not seeing banks and insurances companies winding down, breaking up into profitable parts, etc… just more of the same, albeit they are hoarding cash. It may well take another Lehman Bros type failure to force deleveraging and forward progress.
If indeed the EU makes the bold move of nullyfying the CDS market, while painful, it just might be the needed first major step on the way to recovery. It would force deleveraging and breakups of banks and insurance companies into profitable and non-profitable parts. And in fairness some parts of AIG are rumored to be doing pretty well. Its how the freemarket has worked for ages… we no longer have massive and too big to fail buggy whip manufacturers, we do have a number of small scale manufacturers who do happen to make buggy whips though. If an entity is too big to fail, they are too big to exist.