Let bank bailout plan expire

Let bank bailout plan expire

Kansas City Star: The Troubled Asset Relief Program, approved during last fall’s market meltdown, gave Washington authority to spend up to $700 billion to stabilize the financial system.

The question is whether TARP should continue beyond its current expiration date of Dec. 31. If Treasury Secretary Timothy Geithner decides to extend it, it will live on until next October.

Geithner should allow it to lapse. Otherwise, it could morph into a slush fund.

Despite widespread objections, last fall Congress was right to take extraordinary steps. The financial sector appeared to be on the edge of collapse, an event that would have engulfed the entire economy.

TARP helped achieve stability. But it has proven an imperfect solution to a monumental problem.

It was supposed to buy up the toxic assets that impeded bank lending. Instead, much of what was shoveled out was used to buy up preferred stock in banks — in some cases, in banks that didn’t need the money.

TARP money went to insurance companies and helped rescue GM and Chrysler.

In a recent congressional appearance, TARP Inspector General Neil Barofsky acknowledged that the program had improved market stability, but he noted that it hasn’t spurred increased lending.

Some think TARP should be extended, in case of another crisis. A better course would be to bolster the Federal Deposit Insurance Corp., which backs up deposits and deals with failing banks.