Paul Kedrosky: Congress Makes Wall Street Sympathetic

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February 11, 2009

Congress Makes Wall Street Sympathetic

Over and over again, Congress manages to do the impossible. This time around it has somehow made Wall Street CEOs … sympathetic. Evan Newmark explains why:

[Maxine] Waters (D.-CA) addressed the eight CEOs as “Captains of the Universe.” Captain Kirk? She then followed up with questioning so rude and confused that the CEOs came across as gentlemen geniuses. Here’s an exchange between Waters and BofA Chief Ken Lewis:

“I think it’s important for us to understand why you paid yourself fees on the money we gave you. As a matter of fact, Bank of America you paid yourself $30 million in fees just to accept our TARP money…Why do you do that?”

To which Lewis paused before answering, “I don’t know what you’re talking about.”

As for [Michael] Capuano (D.-NY), he had a red-faced rant better suited to nursery school than Congress. “I am amazed that none of you have been prosecuted yet!” he yelled, before demanding the head of the guy who invented credit default swaps.

…That TARP was “successful” runs hard against the conventional wisdom. TARP is seen as a failure because millions of Americans are still hard-up for the credit they can’t really afford anyway.

But the true purpose of the TARP money was to recapitalize and save the banks – not necessarily increase their lending. At least not directly.

So what was with all of today’s mumbo jumbo about evaluating TARP in terms of lending?

Politics. The politicians sold TARP to America’s credit junkies as the fix for their credit woes. But they failed to mention that loose lending is exactly what created the mess with the banks in the first place.

More here.

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