The Senate has gone and released the second half of the TARP funds, $350 billion of what could be deployed as an augmentation to the stimulus legislation. Remember that this money goes out in loans and it is possible that the public will actually make a profit off these investments; the entire program will not end up costing the government $700 billion, the original size of the package. Some political observers were concerned that the vote to release the money might go against the incoming administration, but no, the resolution that would have halted the funds failed 52-42, with eight Democrats joining 33 Republicans trying to hold up the release and six Republicans joining a majority of Democrats to support it.
The Democrats bucking party lines were a combination of fiscally conservative types (Evan Bayh and Ben Nelson) and progressives (Russ Feingold and Ron Wyden). The Republicans siding with the president-elect included some I expected to see (George Voinovich, Richard Lugar) and some I didn't (Jon Kyl). But figure this vote as a potential baseline for the stimulus legislation and any other big-ticket economic agenda items. Keep in mind that, with all the criticism Harry Reid has recieved in the last month, he probably could have swayed a few more Democrats across the line if he had to but was content to let this sit with a simple majority, since both parties voted overwhelmingly for the original TARP legislation in the fall. Now a few senators -- including the newly elected Jeanne Shaheen -- owe the leader a favor.
This money will likely be used to encourage banks to start lending again -- there's some evidence that the previous plan has been having some effect -- and in so doing, get business and the economy growing again. But the second half of the money should be deployed with much more care and transparency, and Robert Reich has some ideas on how to use stricter regulations to ensure that TARP funding for banks is used for loans, not for buying out other banks or enriching executives. This money could also be used, in combination with the Durbin bankruptcy loan modification legislation, to help provide immediate foreclosure relief.
But this morning, this looks like another political victory for Obama, admittedly not an unexpected one. As a dry run for passing his stimulus legislation -- which Republicans, especially in the House, are starting to come after with more vigor now that specifics have been released -- it's a good start.
-- Tim Fernholz
