November 12, 2008 11:37AM

The TARP is Now the CARP

By Brian Sullivan

“…and just like that - POOF! - he was gone”
- Kevin Spacey in “The Usual Suspects” talking about Kaiser Soze

The Troubled Asset Relief Program (TARP) as we know it is dead. I would only half-jokingly suggest to the government marketing folks that the TARP should now be called the Consumer Asset Relief Program, or CARP.

Today Treasury Secretary Hank Paulson announced that the $700 billion dollar rescue plan will be targeted less to mortgage-related assets and more to consumer-related products. Paulson said that while many banks still need support, he added:

“…the important markets for securitizing credit outside of the banking system also need support. Approximately 40 percent of U.S. consumer credit is provided through securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt. Addressing these two priorities will have powerful impacts on the overall financial system, the strength of our financial institutions and the availability of consumer credit. Third, we continue to explore ways to reduce the risk of foreclosure.”

And just like that - POOF! - the TARP evolves. What was once sold as a rescue plan for troubled assets based primarily on mortgages and homes has become a much more broad attempt to ease consumer fears and increase consumer spending.

One of the underlying assumptions in marketing this plan was that the taxpayer would be getting something for her money. If the government buys a distressed mortgage-related asset, the taxpayer may benefit as the value of that home moves back higher over time. Thanks to a sharp-eyed Fox Business viewer correctly notes that under this revised plan, taxpayer money may now be used to buy depreciating assets, such as car and credit card loans. While a car loan may have some inherent value in the interest payments (assuming the loan is paid back) the underlying value of the security - the car - only falls in value. One of the arguments used by the government.

Rather oddly, Paulson also made the following comment:

“In the meantime, the GSEs now operate on stable footing. They have strong government support backing both future capital and liquidity needs. We have stabilized the GSEs and limited systemic risk, and our authorities provide us with additional flexibility to use as necessary to accomplish our objectives. “

The GSE’s are Fannie Mae and Freddie Mac. Both are posting record losses, quarter after quarter. It is contradictory to suggest that these entities are on “stable footing” and in the next breath say they have “strong government support.” If they were indeed “stable” they would not need government support.

Scrabble junkies have no doubt noted you can change the letters of CARP around to some amusement.

33 Responses to “The TARP is Now the CARP”

Comment by Keith

November 12th, 2008 at 11:50 am

Brian,

Sec. Paulson quickly mentioned that the average monthly savings for homeowners who’s mortgage was restructured was 23%.
Now if I reduced my monthly mortgage payment by 23% on my own, there would be consequences - namely a black mark to my credit report or a lien placed on my house that would be collected at the next sale.
Is there any downside or consequences for these people who signed on the dotted line for these ARM’s who are now receiving this 23% discount on their original commitment?
Perhaps I should just go see a therapist about my “selfishness” virtue and get over it?
Comment by Mike

November 12th, 2008 at 11:56 am

Hey Brian,
Well I’m no Scrabble junkie but it took me a whole 10 seconds to make MY new word! TARP changed to CARP… but it’s ALL GONNA TURN TO CRAP!

Say it, buddy! I double DARE you!

A loyal listener,
Mike
Comment by Paul Williamson

November 12th, 2008 at 11:56 am

CARP is more appropriate because something fishy is going on here.
Comment by John

November 12th, 2008 at 12:01 pm

A pig by any other name, would still be a pig.

Why anyone would buy “Troubled Assets” is beyond me. If the banks can’t make them work - who can or better yet why would anyone (including the government) try?

Want to help the economy? Give some of the bailout money to those of us that pay our bills and we will pay of our mortgages, which in turn would give the banks the money they need to do other “profitable” business.

If they then decide to do stupid things, like give money to those who cannot pay them back as the democrats forced them to do, LET THEM GO UNDER!

It’s that simple!
Comment by Ward

November 12th, 2008 at 12:01 pm

I hate to say I told you so. This is an absolute joke. Played on the American people by stupid journalist such as yourelf. I am close to the housing market and loans have never slowed down. What has slowed down was the credit limits on credit cards financed by China to buy crap from China. Thanks now the American middle class worker will have to support China’s economy while our economy is completely destroyed.
Comment by s.r.b.

November 12th, 2008 at 12:24 pm

Letters should be changed to CRAP if you ask me…
Comment by Sheila Tillman

November 12th, 2008 at 12:37 pm

This would be a violation of Sherman-AntiTrust (1890) in the commercial world - they call it bait and switch.
Comment by Mr. Smith

November 12th, 2008 at 12:46 pm

Not the CARP, but the (ATE) CRAP — At Taxpayer’s Expense Consumer Relief Asset Program. The ATE part is understood and never spoken.
Comment by Steve

November 12th, 2008 at 12:51 pm

This is taxpayer rape.
Comment by NIck

November 12th, 2008 at 12:55 pm

Your tax dollars thrown into the hole known as,DEPRECIATION.There is now ,no way to recover that money in the future.
Comment by Rob

November 12th, 2008 at 1:07 pm

Regarding Paulsen’s update on the financial crisis
A flood of words containing a drop of substance, clearly the man is not up to the task, give me a person with some good old fashioned horse sense, not non-sense, after all didn’t he suggest two months ago to the Senate Banking Committee we were facing the equivalent of an extinction level event in a matter of days?
Comment by Mike G

November 12th, 2008 at 1:21 pm

Brian, what I like most about you is that you cut through the BS and there is so much BS going on you are going to need a chainsaw!

Our government has lost sight of the one and only factor that will turn this economy around and that is PRODUCTIVITY. Giving money to greedy folks are guily of USERY charging 30% interest is CRIMINAL.

They need to be awakening the sleeping industrial giant that is America - and I am not talking out GM and the fat-cat pension funds. Those guys should just go away and be replaced by a more efficient auto producer.
Comment by Ray Irish

November 12th, 2008 at 1:23 pm

What I’d like to know is what do the people that want to give the auto companies this bailout drive for their own cars? Would be interesting to find out, because I”d bet that most drive cars from other countries.
Comment by Jim H.

November 12th, 2008 at 1:33 pm

It looks like now the TARP is becoming the FFEBGC (Federal Financial Executive Bonus Guarantee Corporation).
Comment by Ray in PA

November 12th, 2008 at 1:57 pm

Brian…
Get ready to use more and more names… This will never end…
First, it was mortgages & financial institutions, then auto companies. Now consumer debt (car loans/leases, credit cards, student loans, etc). Soon it will be pension/retirement funds and also State & Local governments…
Comment by Generalee

November 12th, 2008 at 1:57 pm

Wow. Is this really happening in America? Amazing that in less than 2 generations the greatest country in the world whose fore fathers fought for freedom could be so quickly relinquished because of the love of money. God help this greedy and weak generation.
Comment by Steve

November 12th, 2008 at 2:17 pm

Increasingly things are sliding down a hill. The $700b ‘rescue plan’ did nothing and will do nothing to rescue anyone. Our economic model is broken and is begging for a natural reset - yet the government fights to keep it intact. Impossible! What’s worse is that by not letting this reset come natural they are bankrupting the U.S.

Stand back, let the damn break and hopefully you are firmly rooted that the floodwaters do not wash you away.
Comment by Apply to become a Bank Holding Co. - Bad Credit Repair Discussion Forum

November 12th, 2008 at 2:28 pm

[...] Apply to become a Bank Holding Co. The TARP is Now the CARP at The Brian Sullivan Blog __________________ How come "phonetically" is spelt with a [...]
Comment by M. Smith

November 12th, 2008 at 2:46 pm

Well you are right on the last word that this is truly CRAP!!! When I read what Paulson said in his press conference I just wanted to scream at the top of my lungs NOOOOOOOOOOOOOOOOOOOOOOOOO!!!!!!!! That being said the TARP was drafted to quickly with no restrictions on what Paulson could do with the funds, bad planning. It was hurry we need to help these people who would not otherwise qualify for a mortgage loan to help them out, now let’s just invest in banking without any regulations on what the bank can do with the funds. This is simply sad. If another BLOAT err.. I mean Bailout is formed everyone in the nation needs to tell the congressmen and senators to say NO MORE.
Comment by 6ftrabbit

November 12th, 2008 at 2:46 pm

Generalee: Yes, it is. And it’s just the beginning. This country is in a whole lot of trouble. Far more than we know about. FBNs’ upcoming FOIA request, and possible lawsuit, may shed some light on what has been hidden.
Comment by PacificGatePost

November 12th, 2008 at 3:49 pm

BAILOUTS ARE COMPLEX BEASTS

Here is a workable plan with common sense for the U.S. Auto Industry -

http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html

Do not leave it to the likes of Paulson or Congress to come up with a creative plan or consider taxpayers’ interests.
Comment by Keith

November 12th, 2008 at 4:17 pm

Totally - Unpopular - Rescue - Debacle . . .

(I know you can’t publish this one. . .)
Comment by Bob

November 12th, 2008 at 5:24 pm

I thought the bankruptcy protection was a form of government intervention to help failing businesses. It seems that one form allows you to re-organize without creditors piling on. The other form allows liquidation and wipes out the debt so you start from zero. But both are overseen by federal courts and both have been in existance for years.
This is all about bailing out investors, CEO’s, and Unions. If I lose my source of income and can’t pay my bills, nobody bails me out. I have to file for BK. Why not the same for them? Many friends have criticized me for not GAMBLING in the stock market. I guess they were right becasue if you lose, the government seems to want to make you whole and bail you out.
Comment by Steven Hitt

November 12th, 2008 at 5:31 pm

CRAP is right. This hoax pulled over on the American taxpayer and a naive Congress (read amazingly stupid) is criminal. I am in total disbelief about what comes out of Washington D.C. these days. God help us.
Comment by Sam

November 12th, 2008 at 6:01 pm

Brian,

Why do you think the majority of Americans opposed this bill to begin with?
We all saw what was coming. Why do you think we were yelling “just let the banks fail” “we will take our beating and pick ourselves up again”? Because we knew what was coming. However, we got slapped on the hand by the media, who told us we needed to support the bill (figure out details later) or we would all die!

Americans have seen this path before, anytime our government tries to rush any bill through (especially a tax payer funded bill) you can bet it isn’t what they say it is.

Stop the rescues, stop the bail outs, and let the chips fall where they may. The majority of Americans are strong. As we have said before, we are prepared and willing to brave the storm, if it means our children and grandchildren will not have to. Americans will not let this country fail. If we have to brave a storm we will, and will come out of it stronger and better for having done so.
Comment by American Express is to become a bank - Credit Talk Forum

November 12th, 2008 at 6:13 pm

[...] They are becoming banks so they can get of the piece of our tax dollar pie…rather than backing mortgages, it looks like will be shoring up unsecured debts and depreciating assets. The TARP is Now the CARP at The Brian Sullivan Blog [...]
Comment by A Capitalist

November 12th, 2008 at 6:22 pm

I wonder if at some point someone will sue on the grounds that this bailout nonsense is actually unconstitutional. The gov’t does not have any enumerated powers in the constitution that allows it to do this. But I guess that hasn’t stopped it before.

And even if sued, I’m sure that our current Supreme Court would find the federal power implied in there somehow. Kinda like when they butchered the 5th Amendment in the Kelo decision. The 5th amendment only allows the gov’t taking private property for public use if there is just compensation. In the Kelo decision, the local gov’t took the property of private middle class citizens (homes) and then sold it to a developer who promised to build a commercial office park which would bring in higher property tax dollars. It wasn’t to build a badly needed road or any other critical public infrastructure, nor were the properties in bad shape. These were perfectly fine, middle class homes. Well the homes have been bulldozed. However, no commercial property has been built. George Washington, were he alive today, would be reaching for the his gun.
Comment by B Scott

November 12th, 2008 at 11:59 pm

I,ve known for a long time that the higher ups in the media “know” whats really taking place, I,ve also known for a long time that your average media type is not a free thinker and is as blind as the masses(just read the drivel they print and that conclusion is obvious) This economic mess has been “planned” for a long time,the current rhetoric and so called attempts to “fix” the mess are simply a charade. The elite will find it necessary to introduce a new world cashless financial system, a system by the way, where the middle class no longer exist,nor their 401k,s, nor their guns or their freedoms.Just wait until they announce it, you,ll be amazed that every i will be dotted and t crossed,a system that would have taken “years” to devise and organize will supposedly be dreamed up in one of their famous weekend meetings.
Comment by r rajan

November 13th, 2008 at 8:36 am

Here is a radical idea that can save the American Tax Payers money and eliminate the need for a housing bailout. Why not offer US citizenship for up to 6 people if the can purchase a house in cash and pass some security messures.
If we had some version of a plan like this we could probably eliminate the glut in the housing market and therefore stabilize housing prices. The bailout is doomed to fail unless we address the problems of supply and demand.
Comment by Hal Slusher

November 13th, 2008 at 11:30 am

I have not had this much enjoyment reading comments in years. I think there are many really good thinkers on here. Carp = crap the best is TURD. God love you all. And yes it is crazy.
Comment by Mike Pracht

November 13th, 2008 at 12:02 pm

I do not believe Pauslon’s “argument”, that the facts changed, thus we gotta have a different plan. I am more inclined to think that some staffers did not do THOROUGH research. It’s not the first time, ie “Iraq has WMD”…
Comment by TomMc

November 13th, 2008 at 1:16 pm

The TARP was CRAP when it was approved. It seems the only provisions in the orginal bill that remain are the bribes (earmarks) given to members of cogress.
Comment by pink panther

November 13th, 2008 at 7:54 pm

These people are raping us! We are bailing the billionaires out, and they are not held accountable at all for their stupid mistakes and bad decisions (greed). Folks, we have been lied to. And instead of sitting back and doing nothing at all, we need to stand up and do something about this. We are being robbed blind! In addition to this, I bet Congress will not blink an eye when they vote for their raise. After all, the members of Congress do not pay taxes (the IRS), they do not pay into Social Security, their retirement and medical benefits are free, and paid for by the blood and sweat of the tax payers! Yes, they have lost their minds alright. They are elected public officials and should have the same pay and benefits comparable to the US Military.

If you stop and think about all of this crap going on, one may wonder if this is a scheme to speed up “the one world order” plan that has been discussed and planned out behind the scenes for many years! Part of “the one world order” is the redistribution of wealth!