TARP isn’t large enough to recapitalize the banking system

The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.”

Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahnPchOxZMh8&refer=home

Hum, Citi, BAC, GS, JPM rallying more then 100 % from lows. Can´t be "absolute mess", or ?

 

IMO the govt has thrown in the towel and will simply print money to buy the bad assets from the banks until its all better.

 

CDO's, CLO's, and the CDS's which insured it all were the brain child of financial rocket scientists who had too much influence in the market place. At this point no one wants to buy them anywhere near book value and the owners can't sell them at fire sale prices. The $ amounts involved are staggering. TARP was nothing but a Hail Mary Pass which Treasury and the Fed hoped would foster an orderly process (reverse action or regulated exchange trading model) to keep these OTC derivatives trading while the issues in the underlying assets stabilized and wound down over time.

Printing money to mend the system punishes the majority to save the minority. But then again, isn't that how it always works in Washington?