After having done so much to create the current economic crisis, you’d think House Financial Services Committee Chairman Barney Frank would be a little more cautious in the future. But no. He sees every new source of funds as a special interest honeypot for use to further subsidize the housing market which his policies had done so much to inflate.
Rep. Barney Frank, the chairman of the House Financial Services Committee, has come up with a proposal to spend any TARP profits before they can be returned to the taxpayers. Last Friday, Frank introduced the “TARP for Main Street Act of 2009,” a bill that would take profits from the program and immediately redirect them toward housing proposals favored by Frank and some fellow Democrats.
In exchange for receiving TARP money, financial institutions were required to hand over shares of preferred stock that paid a dividend for the government. In theory, if a financial institution paid the dividend faithfully, and then repaid the TARP money, then the government would turn a profit. Last month, the General Accountability Office (GAO) reported that, through June 12, 2009, the government had received $6.2 billion in dividend payments. The original TARP legislation required that money made from the program “shall be paid into the general fund of the Treasury for reduction of the public debt.”
Frank, however, wants to spend the money before it can be used to pay down anything. First, the “TARP for Main Street” proposal would take $1 billion “from dividends paid by financial institutions that have received financial assistance provided under…the Emergency Economic Stabilization Act” and apply it to a trust fund that Frank has long wanted to create for low-income rental housing. (The measure, unfunded, was part of last year’s bailout of Fannie Mae and Freddie Mac.) Next, Frank would take $1.5 billion from TARP dividends for a so-called “neighborhood stabilization” fund. Republican critics have charged that both measures might allow federal dollars to be distributed to activist groups like the Association of Community Organizers for Reform Now, or ACORN.
The “TARP for Main Street” bill would also spend $2 billion, apparently from remaining TARP funds, to subsidize people who are delinquent on their mortgages, and another $2 billion to “stabilize multifamily properties that are in default or foreclosure.”
The U.S. is facing a deficit of nearly $2 trillion this year and will average at least a billion dollars annually in red ink over the next decade. And these estimates probably are far too low. With all of the usual suspects–Fannie Mae, Freddie Mac, Federal Housing Administration, Pension Benefit Guarantee Corporation, FDIC, and more–facing growing losses and expecting more federal bailouts, there is no end in sight to pressure for increased federal outlays. Shouldn’t Congress start trimming somewhere, instead of constantly coming up with new programs upon which to waste money Uncle Sam doesn’t have?