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Considered view

08 Oct 2008 08:55

Open your eyes

By Robert Cyran AND Hugo Dixon

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Context News

The Treasury is hiring managers for the $700bn Troubled Asset Relief Programme (Tarp). The Emergency Economic Stabilisation Act, the law that enabled Tarp, defines assets eligible for purchase by the fund in this manner:

A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and

(B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

It’s not too late to take the cash and use it to recapitalise weak banks directly rather than buying dodgy assets. This would be a more effective way of restoring confidence and protecting taxpayers. What’s more, it wouldn’t even require new legislation.

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