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27th January
written by Sean Noble

When former Treasury Secretary Hank Paulson started screaming that the sky was falling, it became a self-fulfilling prophecy.  Not exactly the kind of thing someone who is supposed to manage expectations is supposed to do.  Think about how much different the financial crisis had been if he had quietly tried to solve the problem when it was just a couple banks looking at insolvency.  But his greed (and the greed of his buddies on Wall Street) drove him to try to convince Congress that we needed $700 BILLION to “save the industry” because “failure is not an option.”

We still don’t have an explanation as to why he picked $700 BILLION as the magic number, but his chicken little routine has now driven the cost of this crisis to TRILLIONS.  He should go down in history as the biggest failure as Treasury Secretary we’ve ever had.

With $350 billion of the $700 billion already squandered, and nothing to show for it, conservatives are demanding that we re-think how this is done.  Arizona Congressman John Shadegg read this WSJ article and promptly sent it out to his supporters saying something was very, very wrong.  Here is what likely caught his eye:

The results have many in the industry scratching their heads. Two banks in Green Bay, Wis., have received federal investments. But in Arizona, a state hit hard by the housing slump, officials say they are perplexed that a dozen or so state-chartered banks haven’t heard back from Treasury about the status of their applications.
Arizona’s banking superintendent, Felecia Rotellini, says she is teaming up with local bankers and state legislators who plan to start lobbying Arizona’s congressional delegation for help. “Some states are getting better treatment, and we just want it to be a level playing field,” Ms. Rotellini says. “I think it’s just a question of advocacy. It has to be a congressional voice.”

Think about that, the purpose of TARP was to help those banks who needed to off-load bad debt, and Arizona has been the fastest growing state in the nation, and thus has shouldered a huge portion of the foreclosure problem. And in order to get what is supposed to come as a result of the legisltion, they have to engage the Arizona Congressional Delegation.

Shadegg followed up with a letter to the chairwoman of the oversight committee that reviews TARP asking her to investigate whether political influence affected where payouts went.  She may not find any such influence, but there is no doubt it’s there.  This is high-stakes politics after all.

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