Wednesday, December 9, 2009
I have never been one to get in another person's grill. However today I will make exception. Let face it, we knew the TARP was a sham in many respects. It was rushed to the floor of both houses... signed quickly by the President... and no one ever got a chance to read all 1100 pages of it. Show we really shouldn't be surprised when a report came out that said the TARP has fallen short of its goals. According to one source TARP:
What TARP did Do...
1. Put a lid on the economic panic that was brewing last year...
2. Capitalized banks... whose names appeared on the right list...
What TARP did Not Do...
1. It has not kept credit flowing to consumers and small businesses.
2. It has not stopped smaller bank failures... (I believe this actually is causing a round of merger mania... or maybe it is better described as buzzards picking over the skeletons of non-TARP banks).
3. Removing toxic assets from bank balance sheets
4. There is speculation that TARP related programs have saved approximately 10,000 homeowners from losing their homes.
Maybe the more troubling factor in the threat of removing government support from a market that is still wobbly. While banks have used tax-payer funds in their trading rooms to make "easy money" in this market. It was easy pickings for a while, but now with the possible audit of the Fed appearing to be a more ominous sigh to the financial elite, there appears to be a counter-measures shift that will have the market sinking or swimming by the end of December.
Not So Fast...
It is interesting that banks are now lining up to pay back TARP funds before the government is able to slap them with additional regulations. According to some accounts, banks have or are ready to pay back $70 billion dollars. However, that is only 10% of the money that was loaned out under the TARP program. If you are smelling something rotten in the state of Denmark, then you are not alone.
We are not really seeing any reform that is so desperately needed on Wall Street. My belief is that the perpetrators of this financial debacle would do it all over again if they had half the chance.
I am considering a covered call strategy with the market. I have several long positions. I am willing to place them in the options arena and allow the sale of options and a more steady method of profiting in the options market. A bird in hand is worth more than two in the bush.
Posted by at 5:07 PM