Tonite I will be on Fast Money with Dylan Ratigan on CNBC at 5:30pm discussing with the crew on the problems with the TARP and what should be done to fix it.
My 5 suggestions:
1 No Strategic Plan: The purpose and objectives of the TARP need to be clearly stated. What is it? No one seems to know! Avoiding financial armageddon? Rescuing homeowners? Recapitalizing banks? Without stated objectives, its difficult to evaluate whether it is achieving those goals.
2. Perform Triage: Evaluative which banks should be saved and which should be put down. If we want to strengthen the financial sector, then we cannot merely throw trillions down a sink hole. Help those that can be strengthened, and have orderly liquidations of those that cannot.
3. Invest Taxpayer Monies Wisely: Why did Warren Buffett get so much of a better deal than Uncle Sam? Treasury and the Fed lack the expertise to negotiate these investments. Set up a matching investments with the private sector. Let those with the expertise make the deals (on arms-length, substantial investments), with the the US matching at 20X on the same terms.
4. Evaluate Progress: Set milestones for achieving goals — every month, quarter, year. Have clear metrics that let us determine if we are moving towards our objectives. This has been notably missing from the TARP.
5. Avoid Moral Hazard: Stop rewarding bad managers, executives and companies. TARP recipients should have anyone associated with the collapse fired; C-level execs and board members tossed. Why are these firms paying taxpayer monies out as dividends to the shareholders? Where are the clawbacks of bonuses? Those responsible for the mess should not profit from it.
UPDATE Here is the Video: