If, Then …

President Obama (on Twitter):

If big financial firms can afford massive bonuses, they can afford to pay back the American people. Watch: http://bit.ly/V-8

Interesting. I’m guessing the President is referring to funds under the TARP programs and that banks that paid bonuses should be able to repay what they owe the government under TARP. First, the magnitude between bonuses and TARP funds is quite large, so the statement is nothing more than bumper sticker logic. It’s Twitter, after all. If you can afford to go on a vacation, does that mean you can afford to pay off the balance of your mortgage upon your return? Probably not.

Beyond that, what evidence is there that the outstanding funds, if paid back sooner rather than later, would be returned to taxpayers or used for deficit reduction, however small the impact? Very little.

The President has said TARP would be “winding down” soon. By “winding down,” the President apparently means that Treasury will be taking unallocated or repaid TARP funds and using them for completely new purposes:

In a letter to congressional leaders, Geithner defended the program, which has provided more than $250 billion in capital injections to banks.

[Geithner] said TARP will be refocused to aid homeowners facing foreclosure and to provide capital to small and community banks so that small businesses have access to credit. Treasury is also reserving funds to facilitate small-business lending.

Some funds may be used to increase Treasury’s contribution to the Term Asset-Backed Securities Loan Facility. Based on the statute that created TARP, the Obama administration would need Congress to approve any further extension of the use of TARP funds.