February 23, 2009
Posted: 11:41 AM ET
By Ed Gillespie, Former White House counselor to President George W. Bush
As the administration of George W. Bush was developing the $700 billion Troubled Asset Relief Program (TARP) last fall, the perils of moral hazard and government control over our nation's financial sector were well understood.
Like the president himself, I was loath to see a massive government intervention in the financial markets. But I also heard the president's top economic advisers tell him that a failure to act decisively could plunge us into another Great Depression.
As the world awaits the details of the Obama administration's version of TARP, two things have changed since last fall: First, we're not facing the same massive, day-to-day market volatility and frozen credit markets that were the context of the original TARP decision. Second, our new president doesn't have the same instinctual resistance to government intervention as his predecessor. Consequently, the next iteration of TARP is likely to be much more far-reaching. Democrats appear poised to impose many intrusive conditions on our financial institutions.
This will present Republicans in Congress with a far more difficult debate than they faced with the stimulus package earlier this month. Republicans benefited in the stimulus debate from offering an alternative approach to creating jobs, with a focus on lower taxes for small business owners, and from ridiculing outrageous pork-barrel spending. Critiquing an expanded TARP and providing a positive alternative will pose a much greater challenge.
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