Did TARP 1.0 Get it Right?

Some good comments from Robert Baird (and follow the links to Yves Smith) regarding the emerging view that TARP 1.0 was the right solution.

For those (like Joe Nocera, NYT) "First Bailout Formula Had It Right" who believe that the intent of the original TARP program was nationalization of bad banks -- or at least bad bank loans -- I say let's deconstruct the words. Someone spent more than a few minutes picking "TARP" among the various pronounceable acronyms that could've been created so there must be some subtext worth examining.

"TARP" stands for "Troubled Asset Relief Program". At the time, these assets were thought to be merely "troubled". Not distressed, not underwater; just a little anxious or, like teenage boys, a bit undisciplined and prone to mischief. The thought was that the government could take them into its custody, perhaps let them spend some time at the spa or in rehab and maybe in a few years they would be restored to perfect health with nary a care in the world.

Now, the growing consensus is that maybe some of these assets are more than a little "troubled" and let's face it, "impaired".

If, as widely expected, the Obama administration comes out with a new program next week, they'll need a new acronym. I suggest "Commercial bank Recapitalization and Assistance Program" or CRAP. The assets acquired by the taxpayers will be known, quite sensibly, as the CRAP assets. That should be easy to remember.


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BTW, Can anyone shed some light on "TARP"?

Was it meant to suggest a tarpaulin, perhaps in the sense of a being spread UNDER the assets as a sort of safety net? Dictionary.com defines "tarpaulin" as "a protective covering of canvas or other material waterproofed with tar, paint, or wax", which reminds me more of the sheet they pull OVER dead bodies at a crime scene.

Maybe the acronym was more apt than its creators intended.