TARP repayment: An IM exchange
Felix Salmon: It’s a bit like the rules-based vs principles-based debate
John Carney: I’m convinced that Geithner is violating the law by imposing conditions.
Felix Salmon: Should TARP repayment conditionality be written down in legislation, or should it basically be left up to Treasury on an ad hoc basis?
I think the law is largely irrelevant
John Carney: Which is kind of troubling. I mean, if Congress specifically includes a provision, can the Treasury just ignore it? Has the democracy bubble popped?
Felix Salmon: The law gets written in a hurried way by people who don’t really know what they’re doing, and then the facts on the ground change
I know you can say that about most laws of course
But in this case things are just moving too fast, and it’s the job of the Treasury secretary to stay on top of them
John Carney: Yeah. I think a truly interesting question is how this wound up in the stimulus bill.
Felix Salmon: It is a bit weird that a pro-bank clause ended up in the bill when Congress was mainly trying to punish Wall Street as much as possible
John Carney: especially since it specifically nullifies a clause in the original TARP agreements
Felix Salmon: My guess is that rather than pick a fight with Congress, Treasury let it slide, safe in the knowledge that no bank would try to repay TARP funds in the face of Treasury opposition, no matter what the law says
John Carney: Possibly. Or they just didn’t see it.
Felix Salmon: Lord knows Treasury was (and is) woefully understaffed back then
John Carney: yeah. and it was a huge bill.
Felix Salmon: Do you see any bankers taking the letter-of-the-law argument?
My guess is they’ll think about it for a few minutes, and then decide that it’s far too dangerous to go there
John Carney: I dunno.
Paycaps are a mighty incentive to defy Timmy
Felix Salmon: true dat
and Timmy isn’t looking particularly fearsome these days
John Carney: I’d piss tim off if it meant the difference between making $30 million and $500K
Felix Salmon: And certainly Jamie Dimon’s ego is well-developed enough to take on anybody
John Carney: He’s far more popular than Geithner anyway