Bailout Merry-Go-Round: Senate Debate Languishes on TARP Junior

Monday, August 2, 2010 12:47 PM

On Friday, Senate members once again failed to invoke cloture on the Small Business Jobs and Credit Act of 2010. H.R. 5297. The Center for Fiscal Accountability has consistently urged lawmakers to reject this bill since its introduction as it is a plan that would create a second Trouble Asset Relief Program (TARP) for small lenders.  

The first TARP was sold to the public as a necessary measure to steady the declining financial markets, but it was never implemented in the way it was advertised.  The program was supposed to purchase “toxic assets” from banks that were considered “too big to fail” but instead injected funds into various industries, including the auto industry. On the heels of an announcement by the prime recipient of these bailout funds, GM, that they will start production on a car no one wants, the efficacy of bailouts should be even more clear.

This Small Business bill in the Senate is effectively Tarp Jr., another effort by Senate democrats to spend their way out of a problem when we have seen over and over again that it doesn’t work. What’s more, the AP reports today that the lending structure for the “small business lending program” is even more lax than the original TARP – small banks don’t have to be deemed potentially solvent to receive funds. Instead, regulators are tasked with projecting whether a bank will become viable after an injection of tax dollars, a criterion that, if satisfied, is enough to qualify a financial institution for federal money. Talk about a self-fulfilling prophesy.

Taxpayers deserve better options from lawmakers than another bailout. The bill may come back up for another cloture vote tonight. With the Senate remaining for only another week before an extended August recess, their full plate could mean the measure falls to September. One thing remains certain, however – the measure, which has been debated since June had made the writing on the wall clear to lawmakers: voters are increasingly anxious about another taxpayer-backed loan program in the works, and will not be fooled by the rhetoric of a “jobs bill” being employed to mask that this bill is just a reiteration of failed spending policy.

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