There has been a lot of talk lately regarding the use (or should I say ‘misuse’) of TARP funds. Under the Troubled Asset Relief Program, banks were instructed to use the government money primarily for lending purposes. The word on the street is that this project is not moving forward as planned, or at least it’s not moving fast enough as lending appears to be on the decline. Numerous reports indicate that banks lent less money in February of this year compared to October of 2008 when the TARP was first announced.
Mortgage originations did rise in February of this year, from January. However, the number of originations has pulled back slightly since then, despite the significant drop in mortgage rates. Borrowers looking to refinance their mortgage and those looking to buy a home are finding it more difficult to secure the financing they need, since many lenders have tightened their guidelines. A logical explanation for the increased restrictions is that lenders want to avoid another housing market meltdown. That is all well and good, but it begs the question- What is the point of the TARP then?
Some banks suggest that they didn’t want to accept TARP money in the first place. Other banks insist that they are lending more these days than ever before. The issue on the table is that there is no transparency. We have yet to see exactly what TARP money is being spent, and where. The housing market is in desperate need of revival, and we have not seen the TARP make any significant impact.
Unfortunately, those in need of a mortgage will find it harder to get approval these days. Isn’t it ironic that we (American tax-payers) have essentially loaned money to the banks, and now some of the banks are unwilling to loan it back to us?
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