TARP is Closed for Relief Until Further Notice

Remember what a crisis the $700 billion mortgage market bailout was--the very existence of the American financial order hung in the balance.

It required an emergency meeting of Congressional leaders, the Federal Reserve, and White House. Congress needed to work through the weekend to pump out hasty legislation. Then we watch in eerie anticipation as the House voted, only to be watch in horror as the initial bill was voted down and the stock market went into a panic.

Well, it seems it really wasn't that much of a crisis.

The original plan to buy "troubled assets" that were apparently "strangling" financial markets, was scrapped on arrival. Of course, making the name Troubled Asset Relief Program (TARP) a bit awkward. Instead Treasury Paulson seemed to like UK Prime Minister Gordon Brown's rescue plan better--immediately investing in the largest, and relatively speaking, most stable banks.

However, that plan only put into action a mere $250 billion, most of which seems to have been used to fund the strategic acquisition of smaller banks. Now TARP continues to encourage other banks to take advantage of the capital for equity program, almost to the point of marketing it.

Meanwhile, homeowner defaults and foreclosures still rise, continuing to flood housing inventories with bank sales, and bank balance sheets are still full of illiquid troubled mortgage assets--remember, the original problem.

All that said, Treasury Secretary Paulson has announced that TARP is closed to all but the biggest of potentially unforeseen crisis. Yes, the housing crisis can will be kicked down the street to the new White House resident.

In Secretary Paulson's words, "I'm going to do what we need to do to keep the system strong and to react the ways we need to react during the nine weeks I'm here." Well, at least he is going to just leave his office vacant until President-elect Obama arrives.