Definition of a Tarp

A tarp is something used to cover something up. A tarp is ugly. The only thing uglier is what’s under it.

Conveniently, the U.S. Department of the Treasury has a name for the $750 billion and growing bailout plan for U.S. banks. TARP. Which stands for Troubled Asset Relief Program.

Here is how it works. You pay federal income tax which goes to the U.S. Department of the Treasury. The U.S. Department of the Treasury is now doling out your money to banks across the United States. This program was supposed to help the economy by enabling the banks to make more loans for things like houses and cars. However, the bailout funds to the banks came without any requirements as to how the banks must use the funds. The banks are not required to loan the money. In fact, they can use the funds to acquire additional banks if they choose to do so.

The following is from an article in The New York Times by Mike McIntire on January 17, 2009.

“At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.

‘Make more loans?’ Mr. Hope said. ‘We're not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

Thanks for clarifying, Mr. Hope.

That warm feeling you are having right now is Mr. Hope relieving his troubled asset down your leg.