TARP Troubles

The TARP program, as established by President Bush back in September of 2008 and continued by President Obama, had as its primary purpose to stabilize the banking sector and prevent any further collapses along the lines of Lehman Brothers. The secondary purpose was to get the nation's lending mechanisms moving freely again, keeping money circulating through the economy and spurring the recovery.

If TARP has succeeded in the first aim, it certainly has not in the second. Last week, special inspector general Neil Barofsky testified to Congress that TARP has failed to either halt the spread of foreclosures or to foster more lending on the part of affected banks.

Those are two major bottlenecks in the recovery - the housing market and the free flow of credit. Foreclosure rates remain frighteningly high, with one of every 45 U.S. homes in foreclosure, although we're a bit stronger here in New Jersey, at one in 55. (The worst state is Nevada, at one in 10.) And bank lending remains stingy: The 22 banks getting the most bailout funds from the federal government have cut their small business loan balances by $12.5 billion in the past nine months.

If the TARP program isn't able to help on either front, look for more action on the part of the feds. Obama's new banking restrictions could be just the beginning.