Senator John Thune, The Wall Street JournalA year ago our country was in the midst of a serious crisis, with large financial institutions teetering on the edge of bankruptcy. There was a very real danger credit markets would freeze and the economy would grind to a halt.
Faced with that threat, Congress passed the Troubled Asset Relief Program (TARP) to help stabilize the economy. Originally designed and proposed as a straightforward measure to help failing banks get toxic assets off their books while they regained their financial footing, TARP was subsequently used by the Treasury Department to acquire extensive ownership interests in private businesses.
Our financial markets are no longer in free fall and the crisis has receded. Yet we now find ourselves in a troubling situation where the federal government is a major owner of more than 600 U.S. financial institutions and banks, as well as two auto makers, an international insurance conglomerate, and numerous other businesses.
President Obama has become the de facto CEO of large chunks of our economy, with the power to hire and fire executives, dictate salaries, declare what products should be made, and decide winners and losers in the marketplace. The inherent conflicts of interest are enormous and should be a concern to all Americans.
It is time to bring an end to the TARP emergency measures and come up with an exit strategy to get government out of the business of running businesses. The administration owes the American people a timeline for how it will do this.
The Treasury secretary has the authority to either allow the program to expire at the end of this year or extend it into next fall. Ending TARP this year is a vital first step to getting the federal government out of these expensive and risky entanglements in private industry.
Shutting down TARP would also ensure we don't risk losing more taxpayer dollars. The latest report by the TARP Congressional Oversight Panel found that approximately $330 billion of the $700 billion limit is currently untapped. Allowing TARP to end this year and cancelling that remaining $330 billion would remove the inevitable temptation to spend it. With a budget shortfall expected to hit a record $1.6 trillion this year and a staggering $9 trillion over the next 10 years, we should be looking for every possible way to reduce the risk we are taking on behalf of taxpayers.
Once the administration has allowed the TARP authority to expire, it should lay out a plan to sell its stake in these private companies. The plan should allow some flexibility so the Treasury can divest these assets prudently. But there needs to be an aggressive timeline so that we can get out of these businesses as soon as possible.
Without a date certain, the government's unprecedented entanglement in the private sector could drag on for years with more vague reassurances from the Treasury department that things will change "soon." If the administration cannot come up with a plan on its own, then Congress has a responsibility to act.
To that end I've introduced the Government Ownership Exit Plan, which would ensure that the federal government sells its ownership stake within a reasonable time frame. Whether we move forward under a plan developed by the administration or the legislative framework I've introduced is not important. It simply needs to be done.
We also need to ensure that any TARP funds recouped from the sale of assets are dedicated to deficit reduction, not more spending or more government takeovers. TARP was created in response to a very specific-and temporary-financial emergency. It was never intended to become a $700 billion slush fund for whatever business experiment the administration sets its eyes on.
This dangerous mixture of politics and industry is bad for business, bad for the economy, and bad for the American taxpayer. TARP has run its course. The time for ending it is now.