House passes Paulsen TARP oversight bill
September 16th, 2009 – 9:22 AM by Eric Roper
Last night, the House of Representatives passed a bill authored by Rep. Erik Paulsen which requires the TARP program’s oversight body to determine how its funds are affecting small businesses. It is Paulsen’s first standalone bill to make it through the House.
Under the bill, the Special Inspector General of the Troubled Asset Relief Program must factor small businesses into its periodic audits and reports to Congress, looking specifically at whether funds are available to small businesses and if they are having an impact. Paulsen helped co-author legislation earlier this year which granted more authority to the TARP oversight body.
TARP is widely known for aiding large businesses, but Paulsen said in a statement that there should be more focus on smaller institutions.
“Rather than adhering to a ‘too big to fail’ mentality, this bill seeks to strengthen our small businesses by examining their opportunities to access needed credit,” Paulsen said.
Paulsen has faced the obvious obstacles of a Republican freshman in a Democrat-led Congress. Though the House has passed several of Paulsen’s amendments, the TARP legislation marks the first time an individual bill he sponsored has been approved.
25 Responses to "House passes Paulsen TARP oversight bill"
Sounds like a good idea – and pretty harmless politically. I wonder if the Dems will oppose and if so, under what grounds…
***Please note for the record that I’m recognizing an idea from a Republican as a good one. I do this from time to time, and people who actually READ my posts understand this.
I don’t know enough about Paulsen to have much of an opinion yet, but I’m sure he realizes what district he represents and what man he replaced. Hoepfully he reflects many of those same ideas and attitudes.
On this piece of legislation, though I have not read it, I can tell you that a more meaningful way to tackle the issue of access to credit is in the manner framed out in the article (ie making sure sound companies that are small in size have access to working capital to run their business). The economy will see a greater benefit from a program like this than we will see from previous bailouts of companies deemed “too big to fail” that pose “systemic risk” to the system…..or whatever buzz words you wish to attach to such.
“On this piece of legislation, though I have not read it, I can tell you that a more meaningful way to tackle the issue of access to credit is in the manner framed out in the article (ie making sure sound companies that are small in size have access to working capital to run their business).”
I have a problem with the way TARP is being used. Look at its name the Troubled Asset Relief Program. It was ment to get bad assets of financial companies books to free up liquidity. Its not a slush fund grab bag of govt cash for custom credit needs. How are you suppossed to monitor these micro credit needs to thousands of businesses big and small without wasting billions in borrowed funds?
TARP was not designed and certainly not sold to congress then passed this way.
***Please note for the record that I’m recognizing an idea from a Republican as a good one. I do this from time to time, and people who actually READ my posts understand this.
For the record, I think this is a stupid idea. We already have a govt agency designed to provide and guaranty credit for small business. Its called the small business admin. This bill will further morph TARP into something unrecognizable from what was originally passed by congress.
Maybe Kathleen Soliah can be the Czar to oversee this. Work from home.
Did I say Kathleen Soliah. I meant Edgar Winter. Sorry
DB: “It was ment to get bad assets of financial companies books to free up liquidity.”
That’s a half-truth. It was meant to free up a frozen credit market, and the way in which they felt they could best accomplish that was to assume troubled assets off the books of lenders. The real issue they were trying to resolve wasn’t lenders that were losing money on bad investment choices they had made; but rather that because of these sour investments, they were ceasing to keep adequate or affordable lines of working capital to businesses who did nothing wrong in the first place.
This is the element of the original TARP legislation that was never “sold” in any clear fashion to the public. As a result, many people are still angered because they feel DC stepped in to save the collective asses of a bunch of investment bankers…..which did happen as a result, however.
….and DB, don’t get hung up on names of things. Just because its called the Troubled Asset Relief Program doesn’t mean that it is (or should be) limited in size and scope to that and only that. US Department of Agriculture oversees a lot more than agriculture…..everything from the forest service, to rural utility service to school lunch.
“That’s a half-truth. It was meant to free up a frozen credit market, and the way in which they felt they could best accomplish that was to assume troubled assets off the books of lenders.”
No its not. Read the legislation.
“and DB, don’t get hung up on names of things. Just because its called the Troubled Asset Relief Program doesn’t mean that it is (or should be) limited in size and scope to that and only that.”
Read the legislation. This (lending to non financial institutions) IS NOT what it was ment to do.
Jay, I have no problem whatsoever with the govt trying to provide affoardable lines of credit to small business. TARP is not the vehicle to do that. It wasnt passed for that reason and is not set up to do so. TARP is not a financial Swiss Army knife.
If the Govt wants to provide access to credit to small business, they need to increase funding to the SBA, an agency set up and designed to cary out that very function. But, I guess the popular thing to do now is to cram square pegs into round holes.
“US Department of Agriculture oversees a lot more than agriculture…..everything from the forest service, to rural utility service to school lunch.”
TARP is not an agency, its a program run by the UST. Its a very specific authorization from Congress to the UST to purchase specific assets on the books of Financial Institutions.
A troubled asset is defined per the legislation’s language as, “(A)residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.”
“The real issue they were trying to resolve wasn’t lenders that were losing money on bad investment choices they had made; but rather that because of these sour investments, they were ceasing to keep adequate or affordable lines of working capital to businesses who did nothing wrong in the first place.”
I agree. I don’t think most of us would have cared about banks imploding under the weight of their bad investments if it didn’t mean that all the business activity facilitated by those banks lending to other businesses (making payroll for many Americansm for example) would grind to a halt.
Why should we give TARP money to a bank if they just hoard it to hedge against a rainier day and don’t put it out on the street?
“Why should we give TARP money to a bank if they just hoard it to hedge against a rainier day and don’t put it out on the street?”
Excellent question. Bottom line is if you want to insure that small business is getting access to credit, using TARP isnt the way to go. The SBA is the place to start. Shave $100 billion off TARP and give it the the SBA.
TARP isnt a direct to consumer lending facility. Bob from Bob’s hardware store isnt going to walk into a UST office and get access to TARP. The UST isnt set up for that and shouldnt be expected to be either.
But if Bob the hardware store proprietor is used to doing business on a line of credit with Big McBank, and Big McBank takes a bunch of TARP money ostensibly to stay afloat, but then uses it to acquire a floundering competitor and doesn’t allocate funds to lend to Bob any more and he can’t use his line of credit to stock up on snow shovels for his big Thanksgiving sale,
What good was TARP to Bob?
How many dollars, under the banner of TARP, have been used in the manner in which you outline in your previous post?
I think none.
TARP legislation is being viewed as a dollar amount, not a game plan, to do with as they wish to address the problem. Regardless of how you feel about the program, my post stated that facilitating operating capital to small businesses is a better use of those dollars than what we’ve seen so far.
You say “read the legislation.” I’d counter with “read the post you are criticising.”
me: “On this piece of legislation, though I have not read it, I can tell you that a more meaningful way to tackle the issue of access to credit is in the manner framed out in the article (ie making sure sound companies that are small in size have access to working capital to run their business).”
If you wish to argue with me over the fact that TARP dollars are being spent in a manner that is inconsistant with the legislation originally passed to govern that, you won’t get an argument back. I agree. However, if you wish to argue over the real objective of the TARP legislation, or the most effective manner in which to address the credit issue, then I can certainly accomodate.
“Shave $100 billion off TARP and give it the the SBA.”
That is a sound idea. In lieu of that, it is far better to take the same action under the umbrella of TARP than to take no action at all.
Keep in mind this legislation that we are talking about is only making auditors examine the money already deployed to make sure it is making an impact. From what I’ve seen, Paulsen isn’t saying we need to dip into the pot further. He’s simply saying that we need to make sure the flow of money is reaching the entities it was intended to reach (when handed out, not necessarily when/as the TARP legislation reads word-for-word, as DB points out). At this point, I think its relatively useless to argue over the way in which the funds were used. Paulsen is making the case that we should at least be watching the funds that were deployed, whether you agree with the manner in which they were deployed or not.
“How many dollars, under the banner of TARP, have been used in the manner in which you outline in your previous post?
I think none.”
Not none, but close to none. Instead of buying bad assets and getting warrants for them, they have been buying prefered stock instead. But thats much closed than direct lending to consumers.
“TARP legislation is being viewed as a dollar amount, not a game plan, to do with as they wish to address the problem.”
By you maybe and the rest of the public. The UST is trying to stick to the game plan with the prefered stock purchases. This idea of lending to consumers with TARP funds isnt even close to the original intent of the legislation. Not by a long shot.
“(ie making sure sound companies that are small in size have access to working capital to run their business).”
My issue was with this. This isnt what TARP was made to do. This is important of course, but its not what TARP is for. Whats the point of passing legislation at all if we arent going to follow it whatsoever? Buying stock as oppossed to bad assets is at least in the spirit of TARP. Turing TARP into a fund for the UST to lend to small business isnt even close.
“In lieu of that, it is far better to take the same action under the umbrella of TARP than to take no action at all.”
No its not. The UST isnt a bank. There needs to be preasure put on banks to lend. If thats what you mean I can agree. Turning the UST into a commercial bank isnt an option.
“He’s simply saying that we need to make sure the flow of money is reaching the entities it was intended to reach”
Then I need some clarification on what he means here.
“Rather than adhering to a ‘too big to fail’ mentality, this bill seeks to strengthen our small businesses by examining their opportunities to access needed credit,â€
Without reading the legislation, since they didnt include it in the article, its hard to tell what he means. If he means none financial institutions should be able to access TARP directly, Ive got an issue with that.
“Rather than adhering to a ‘too big to fail’ mentality, this bill seeks to strengthen our small businesses by examining their opportunities to access needed credit,â€
“What good was TARP to Bob?”
Not much. But the solution to that problem isnt found in turning the UST into a bank. Its in providing more direction to the banks and shoring up the SBA.
“There needs to be preasure put on banks to lend. If thats what you mean I can agree. Turning the UST into a commercial bank isnt an option.”
That is what this does, as I understand it anyway. So, good to see you agree. I’m unsure where you made the leap from making sure TARP funds reach the small businesses that they were intended to reach- via the major lenders- to viewing the treasury as a commercial lender. I certainly made no such claim, and I don’t think Paulsen is either.
When you said this,
“(ie making sure sound companies that are small in size have access to working capital to run their business).”
along with this,
“The economy will see a greater benefit from a program like this than we will see from previous bailouts of companies deemed “too big to fail†that pose “systemic risk†to the system”
I interpreted that to mean that small business should get ‘bailouts’ too, like the other too big to fail companies did. Since Paulsen was discussing TARP, I thought you were saying small business should get TARP. The way you frazed it, to me sounded like you felt small business bailouts would be more effective than bailouts to AIG and others.
I didnt think you ment the financial companies that received bail outs should be preasured to lend. If thats what you did mean I agree with you.
TARP was designed to aid financial companies and thats all. The money should then go through the financial firms into small business via lines of credit and l0ans. The banks are set up to underwrite and service these requests where the UST is not. Most people have a fundemental misunderstanding of what TARP is, I assumed you were one of those people. My appologies.
Not a problem.
I don’t view TARP dollars coming into a major lender as being materially different those same dollars when they go out the door to facilitate credit to businesses. The TARP is where the originated and the major lenders are the conduit through which they flow.
if that helps further clarrify.
“Why should we give TARP money to a bank if they just hoard it to hedge against a rainier day and don’t put it out on the street?”
Hear, hear. Although my take on the argument isn’t that TARP is meant to level the playing field but rather to keep it dry, so to speak.
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