Treasury has announced that some regional banks have been approved for capital investments via the TARP. I have previously said that the best use of these funds is for mergers and apparently the banks agree (via WSJ):
The federal government’s bank-rescue plan will spread more than $15 billion among 10 regional banks, those companies announced Monday. But some banks acknowledged that perhaps only a small chunk of the money would be funneled into loans.
Here is the essential problem with government investment in private companies:
That deepened criticism from some lawmakers that Treasury Secretary Henry Paulson should have set tougher conditions on the $250 billion being pumped into the U.S. banking industry through capital infusions. “In their eagerness to get everyone on board, I think they failed to make the program stringent enough,” Sen. Charles Schumer (D, N.Y.) said in an interview.
Politicians making lending decisions is what got us into this problem. The economy is in trouble because of excess leverage and so logically, the way to solve that problem is not by making more ill advised loans. Polticians are only interested in what will work until the next election so they don’t care about the long term solution. How long until they mandate that the taxpayer dollars be lent out? Stupid….