Mini-TARP

It would have been quite satisfying if in 2008-09, instead of recapitalizing weak and irresponsible banks under TARP, the government had taken the same money and recapitalized strong and responsible banks instead. Let Citigroup die, said I at the time; take the $25 billion you wanted to give them, and instead find some small banks out there in the hinterlands that didn't load up on subprime mortgage backed CDOs and let them use the money to take Citigroup's business away from them. Well, that plan was never going to be practical on the scale and at the pace that was required at the time, but now it seems that the Obama Administration is pushing a small-scale version of this plan. Edmund Andrews reports:

Having bailed out big banks and big car companies, Congress and President Obama now want to throw some big money at small business.

On Tuesday, the House will take up legislation that would provide $30 billion in taxpayer money to subsidize bank loans for small companies. The bill also includes billions of dollars in new tax breaks and an increase in the Small Business Administration’s loan-guarantee programs....

The biggest proposal is for a Small Business Lending Fund, a $30 billion fund that Obama first proposed in his State of the Union Address in January. The new fund would in some ways be a mini-version of the $700 billion TARP program that propped up big banks, insurers and car companies.

Like the TARP (short for Troubled Asset Relief Program), the small business lending fund is intended to spur lending by injecting capital into banks. Supporters of the new fund say it would underwrite as much as $300 billion in new small business lending, because the banks would be able to lend as much as $10 for every $1 invested by the Treasury.

Of course the idea was to do this instead of the big bank bailout, but we'll take what we can get.