Cometh the hour, cometh the bailout

Well that didn't take long did it? That carefully crafted, focused troubled asset relief program (TARP) is officially history. Welcome to a brave new world of government handouts- in reality a pretty undignified scramble for a slice of a $700 billion pie.

I had hoped policymakers would back away from this, but the emphasis has now shifted to car manufacturers and credit card loans. I know sinners need forgiveness, but do you really want to spend your limited capital on serial offenders? Since everyone else is sticking their oar in, I thought I'd share my idea for using that money.

It goes as follows. Forget buying existing debts - the covenants are likely to be leaking like sieves, and agreeing a market-clearing price on highly illiquid assets is simply too time consuming. Instead, start afresh and purchase new issuance - on terms that are clear and unencumbered with any baggage. If need be, let the existing debt crater - it will help guard against the charge of rewarding people for failure. At least the newly issued debt has a better chance of making it to the maturity finish line without further collateral damage.

It's not too late to get the original (good) intentions of the TARP program back on the table. If we continue down this meandering path the results could be disappointing at best. The road to catastrophe is paved with good lobbying...