More Idiotic Restrictions for TARP Recipients

The federal TARP "bailout," which has been helpful in destroying 85% of the market value of banks, is now coming up with new insane rules for those who accepted TARP money.

U.S. financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must lower dividends, cancel employee training and morale-boosting exercises, and withdraw job offers to foreign citizens.

Essentially, banks are now told how to run every key aspect of their business, from employee training to managing (or in this case, mismanaging) defaults. Would any bank in the country (except for those that would have failed, such as Citi) have accepted TARP funds if they had known these rules up front? Of course not. Would Wells Fargo have agreed to the Fed's request to take on Wachovia with the assistance of TARP funds? No way. Yes, while some smaller banks might be able to pay the funds back, there is no way to undo the mergers that allowed very healthy banks such as PNC and Wells Fargo to undo their mergers with failing banks.

And now that the banks will have all of the efficiencies and incentives of running their organizations like the federal government, I think it's safe to say that the return to normal profits in the banking world just got a lot longer.