Financial institutions will need to raise cash to offset depleted assets. The second half of the TARP should be used to plug holes in the banking sector. Without a banking sector properly capitalized the system will not function properly. Without a functioning banking sector everyone including individual tax payers suffers. There is a backlash building against the financial institutions. Tax payers want to know how the first $350 billion from TARP was used. Rightfully so. In many ways financial institutions dug their own graves and they should suffer the consequences. However the repercussions of not helping the banks would be too disastrous for the rest of society that there seems to be no choice but to help financial institutions replenish fallen capital.
The idea of helping home owners and small businesses is necessary too. But that should be done by other means. Other federal programs separate from the TARP which could be put through by the new administration could accomplish that. Maybe the programs to help struggling home owners rubs some the wrong way too. Are not these home owners ones who got in over their heads and should not be bailed out? Perhaps that is true but the housing depression has been going on for too long. Federal policies that attempt to help struggling home owners will help home owners who did not over reach.
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