Why should banks take any risk when they can borrow from the Fed at close to 0% and use that money to buy Treasury notes? No risk and a decent margin. This continues to stifle small business growth and commercial development and construction. (You don't want to know how I know). There should have been some more productive strings attached to those TARP loans in my opinion.
Bill
Take it one step further. Goldman Sachs and Morgan Stanley (Noel's firm) were NOT banks until the financial crisis and they went running to Uncle Sam. Guess what Hank Paulson allowed them to become banks practically overnight:
http://www.nytimes.com/2008/09/22/business/22bank.html
Goldman Sachs and Morgan Stanley, the last big independent investment banks on Wall Street, will transform themselves into bank holding companies subject to far greater regulation, the Federal Reserve said Sunday night, a move that fundamentally reshapes an era of high finance that defined the modern Gilded Age.
The firms requested the change themselves, even as Congress and the Bush administration rushed to pass a $700 billion rescue of financial firms. It was a blunt acknowledgment that their model of finance and investing had become too risky and that they needed the cushion of bank deposits that had kept big commercial banks like Bank of America and JPMorgan Chase relatively safe amid the recent turmoil.
Now Noel stated earlier in this thread:
What bothers me is this? No body wants to do the right thing. The government won’t do the truly free market or Ludvig Von Mises (Austrian school) solution. Take the hit, go bankrupt and start over. The economy would recover much much faster instead of this long drawn out death. I mean seriously, on a micro level, if you are in debt with not enough income to service it, what do you do? You go bankrupt and start over, you don’t go borrow more and keep doing that in the hopes you hit the lottery or get a great new job and can service the debt. Sure that works if the overall debt level is low, but not when it is uber high like our country’s is.
When was Noel calling for doing the right thing in September 2008 
On to Obama .... here he has a second tier White House assistant Blog about small business creating jobs:
http://www.whitehouse.gov/blog/2010/10/06/helping-high-growth-small-businesses-create-jobs#
Thanks Obama for taking such an interest - ONE MONTH BEFORE MIDTERM ELECTIONS.
I did not think I would ever say this on GCA, Shivas was right!
He warned us about Obama and I did not listen.
First of all who I work for is irrelevant here, this is a forum about golf although I did make a comment on TARP that is completely true, I did not invoke any particular firm that I work for and it does not belong here.. My point in arguing on it, was it is weak politically since both democrats and republicans can both take credit for it being a success yet continue to milk it as a reason why unemployment is weak and the economy is bad, it is purely a scapegoat.
In 2008, what was correct public policy and what I think are irrelevant. First of all, I believe your history is flawed in a few respects. I believe it was Paulson who called in the heads of the investment/commercial banks and said guess what boys, you are taking TARP. And then some of the banks were made commercial banks to further give discount window borrowing if needed. Would any of the banks survived if this did not take place? I'll leave that to the great book, Too Big to Fail. And the answer is this, there would have been massive consolidation with several banks failing due to the inability to get financing in the repo markets-- Since the repo markets are going to be above many here's ken I'm not going to go into it but say this-- Investment Banks financed themselves thru interdealer markets with collateralized lending, not thru DEPOSITS like a normal bank does.. When confidence erodes the system, banks will not lend to each other so gasp they can't fund themselves and they must unload assets which causes a vicious circle.. With no discount window to go to (because they are not commercial banks), the crisis builds.. So I didnt see Goldman etc go running to the Fed, once TARP was developed, this was a natural progression to give another layer of protection and made sense after the whole existing system was scrapped. If all the banks went down (with the exception of JPM which would have survived) I'd imagine new ones would have taken their places or the assets of other would have been picked apart by survivors...New boutique investment banks would have started, there are too many smart people out there, it just would have taken time.. And a lot of those damn hedge funds the press loves to flame would have went down with no repo market to fund themselves either.
What could have happened was this: The Fed seeing this as a crisis of confidence could have guaranteed interbank lending (Ireland did this) allowing firms to fund themselves without TARP etc. It could have then allowed the markets to calm and then ordered stronger capital requirements on investment banks--and let us not get started about Glass Steagal and how that comes into play.
Here is where I see the double standard:
The only solutions so far are more debt and stimulus spending-- I note I see NASA suffering now, which amazes me.. $1trn in spending and we defund NASA, the main incubator of technology and discovery in this country, Government Spending I do support. Why on a micro level does it make no sense to borrow your way out of debt but on a macro level it does? Explain that to me. Here is what is happening that the average american doesnt understand:
1) Social Security will have to be means tested in future years because interest on debt plus SS spending will usurp most government revenues
2) If all this money creation (right now it is sitting in the monetary base and stuck b/c the money multiplier is broken) eventually results in inflation, this vaporizes the middle class because the cost of goods go up and this impacts the lower/middle classes the most
3) Peak Oil--we are running out of oil and oil is what also greases the farming economy.. When gas and food prices go up you vaporize your middle class.. Since the Fed is trying to reflate the massive debt load this will eventually HURT the middle class.
4) This country has LOST its manufacturing base (1/3 of it disappeared in the last 10y) so all of those hard working blue collar workers actually got in on the latter part of the housing boom.. What are they supposed to do now? Where will these jobs come from? I don't know but it seems the stimulus was a big waste if they can't find work or re-tool..
So what is my answer-- well there are no adults out there, no one from both sides to get together and say we need to solve the problems. I would imagine the right thing would be a short term stimulus (not a huge one) combined with a 1-2y plan to get the deficit down sharply which would mean defense spending needs to be cut). I don't think the Fed needs to quantitatively ease.. With a credible medium term deficit reduction plan, confidence will come back into the system. I also think there needs to be a huge boom in Westinghouse scholarships in the US to get the best and brightest here, a flat tax to simplify the tax code and tax incentives for factories to locate in the US. The flat tax can phase in at a higher income level with possible surcharges for income levels above a certain level.. In lieu of that it is hard for me to say that taxes on the wealthy won't go up, but 40pct as the top seems to be the limit for the moment... Markets are all about credibility and our politicians lie and lie and most Americans don't have the time nor the education anymore to see what goes on, they just think government can solve all their problems which is about as likely as caddies on the LPGA tour actually doing the putting instead of all the currently do..
Again, I did not impugn your character with saying anything about double standards etc..
I just want to play golf.