Larry Summers Says Second Round of TARP Will Help with Credit, Not Be Giveaway to Banks

Larry Summers, President elect Obama's top economic advisor said that the remaining funds to be allocated from the $700 billion TARP will not be blindly given to banks, but will be used to get credit flowing again.

“The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Summers said on CBS’s “Face the Nation” program. Obama’s team will manage the Troubled Asset Relief Program “in a very different way,” he said.

He went on to say:

“There’s going to be a very different level of rigor in the evaluation of institutions, the plans that are designed, and the expectations for institutions.  Institutions that are healthy, that don’t need it just to survive, are going to be expected to lend above their baseline levels as part of this program.”

That's reassuring because recent articles have made it clear that the TARP has been a windfall for many banks that has not benefited the credit markets or the consumers or companies that need credit to expand and grow. 

Of course, the main question is whether any of this will matter in an economy that is still overleveraged and that is recovering from one of the biggest bubbles in the country's economic history.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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