If A Better TARP Will Not Do, Build A Bigger One

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The second and last $350 billion of TARP funding is not in the hands or the new Treasury Secretary and the $825 billion stimulus package may not leave the hands of Congress for three weeks. No matter. Both Congress and the Administration have begun the process of resetting expectations.

The amounts of money likely to be needed to revive that economy are already growing well beyond what has been earmarked.

Both Nancy Pelosi, the Speaker of the House, and Lawrence Summers, head of the National Economic Council, have essentially said that restarting the economy will take more money than had been planned..

Pelosi told ABC’s "This Week" program that "some increased investment" might be needed beyond the $700 billion approved last year under the Troubled Asset Relief Program, or TARP, to stabilize the nation’s banks and get them to resume making loans.

Acquiescing to a new reality has become necessary for two reasons. The first is that the economy is getting much worse, much faster than almost anyone expected. The second is that it has begun to dawn on politicians, policy makers, and economists that the money from both the next pull on the TARP and the $825 billion stimulus package will probably hit the system too late to aid it much in the second half of 2009. If, by unlucky economy the economy begins to melt down even more quickly or there are arguments in Congress that hold up sending the stimulus bill to the President’s desk, the capital infusions may not have any meaningful effect until next year.

Whatever the cause, the idea that a fix of the economy was adequately funded is now all but gone.

Douglas A. McIntyre