by Brian Darling
Remember all of those bold statements that the so called “Troubled Assets Relief Program” (TARP), the Bailout of Wall Street Bill, was a one time deal and our federal government should and will never do it again. Secretary of the Treasury Tim Geithner testified in January of this year before the House Committee on Oversight and Government Reform:
Many Americans look at what happened with AIG, and the rest of the financial rescue, and simply ask: Why was it necessary? Why was it fair for the government to take taxpayer money and put it into an institution that had mismanaged itself to the edge of collapse? The answer is that it was not fair, and it was not something our government should ever have to do. But those Americans, those families and business owners who played by the rules and played no role in giving rise to this recession, should understand that if the government had failed to act, that failure would have unleashed substantially greater damage upon them.
If TARP “was not fair” and not “something our government should ever have to do,” then why is Congress trying to impose the TARP model on small business? Congress will consider legislation this week to establish TARP, Jr. for small businesses to be administered and run by none other than Secretary of the Treasury Tim Geithner. The House is considering H.R. 5297, the Small Business Lending Fund Act that provides “temporary authority to the Secretary of the Treasury to make capital investments to eligible institutions in order to increase the availability of credit for small businesses.”
The legislation creates a federally run new bureaucracy called the “Small Business Lending Fund. ” To qualify a financial institution has to have less than $10 billion in assets and the new creation would have up to $30 billion in new investment authority. This allegedly temporary program is set up “without further appropriation of fiscal year limitation,” i.e. not temporary, to purchase “preferred stock and other financial instruments” from small business as a means to infuse money into local banks with the condition that they lend to failing small business. Local banks will be lending in exchange for equity small business, therefore these banks will be using federal monies to buy equity in companies. This is an idea born from socialism and one that will harm the free market for small business, because failure will be rewarded by federal subsidies while success will be punished.
The bill also creates a “Small Business Credit Initiative” with $2 billion of your tax dollars to be given to states that have created programs to provide funds to banks to bailout small businesses in trouble. This would provide an incentive for states to adopt the crony capitalism programs of the federal government exemplified by the federal takeover of General Motors and the activities of Fannie Mae and Freddie Mac. Setting up a system with private profits, yet socialized losses, will diminish capitalism and the American free market system. This legislation, TARP, Jr., extends the failed and free market offensive TARP model to small business. Considering that the original TARP program was “not fair, and it was not something our government should ever have to do,” Congress might want to heed the advice of Secretary Geithner of January 2010 and pause before creeping a few more steps toward American socialism.