TARP must end!

An article today in Wall Street Journal Online outlines yet another opportunity for us, the taxpayers, to bail out a unit of AIG. Read about AIGs ILFC division here.

Now that the Treasury has a $700 Billion slush fund, and has nationalized Fannie Mae, Freddie Mac, the Auto companies, AIG, and most of the larger banks, the political pressure to keep up the bailout action will be hard to resist. In fact, despite protestations, the Obama administration is clearly comfortable getting directly involved in any and all business decisions that it considers important. I have yet to hear anything from the Whitehouse that it is not eager to control.

The real trouble is that once Uncle Sam has set a precedent to bail out businesses, major damage is done because further bailouts are expected, and will be very difficult politically to resist. This interferes with the markets, and corrodes discipline both in risk taking and in liquidations where instead of taking their lumps, losers in the market whine to Washington instead.

The New York Times (here) out lines the moral hazards very well.

Secretary Geithner is currently planning to write a letter to Congress requesting an extension of TARP authorization. This must be resisted.

It is time to call for an end to TARP, and a permanent prohibition on the interventions we have seen in the last year.