Banking Law

Jeb Hensarling: Modern Day Don Quixote

I didn't agree with Texas Congressman Jeb Hensarling, the only sitting member of Congress who serves on the TARP Congressional Oversight Panel, when he initially opposed the Bush administration's original TARP proposal last year. I can't say that I agree with every position he takes on political and economic issues. On the other hand, he's nothing if not consistent in his suspicion of the role of big government (especially, big federal government) in intervening in the economy, and for that I respect him. We need thoughtful opposition to the march of the current administration and Congress, aided and abetted by the federal banking agencies and some of the more notorious opportunists who head a few of them, to impose their version of a "command economy" on this country under the guise of dealing with an "economic crisis."

Last week, Hensarling proposed a bill that would end TARP on December 31, 2009. It would also make it easy for any TARP recipients to repay TARP CPP capital and would end the current administration's attempt to make TARP a roach motel for certain large banks (e.g., Bank of America, Citigroup) that are branded "too big to fail," which is turning into "too big not to be micromanaged by Democratic politicians for the benefit of their core constituencies and largest political contributors." Hensarling's legislation would also force the Treasury Department to liquidate warrants as TARP preferred stock is repaid, thereby removing a hammer hanging over the head of those banks that have otherwise repaid what they "borrowed." Finally, it would reduce the TARP funds available for use by the Treasury Department dollar-for-dollar with the amounts repaid, thereby reducing the Treasury Department's ability to spend those dollars again and meddle elsewhere in the economy with them.

Hensarling appeared last week on CNCB's program "Squawk Box" (see clip below) to discuss the proposed legislation. It became apparent that TARP's merely one of the aspects of the federal government's intervention in the economy that's bugging him. He admitted that his "tipping point" was the "lawlessness" (my term, ot his) of the Obama administration's behavior in perverting the bankruptcy laws so that the United Auto Workers union received far more than they would have had Obama and his minions not used TARP as an arm-twister to get creditors who received TARP and other federal assistance to approve a plan that screwed bond holders who otherwise would have been entitled to more preference than they were given in the final plan. He's worried that this is only the first of many instances of creeping "command economy" maneuvers by the current administration and the majority party in Congress. I suppose he calculates that he might as well start "squawking" about it on television and through whatever other venue he can.

I agree with his attitude toward the prospects of the legislation being enacted: "high hoes, low expectations." I'd add something about a snowball in Hell, but I think he covered the prospects properly. Nevertheless, as time marches on and the agenda of the powers-that-be continues to play out, he'll likely have an increasingly sympathetic audience among many bankers, including all those community bankers who are too small to save, and who've either been left on the sidelines or beaten like drums by the same regulators who handle the big boys with kid gloves.

Full post as published by Bank Lawyers Blog on June 14, 2009 (boomark / email).