Dreaming About TARP

Today’s big news involves TARP, and a WSJ report that the Treasury Department will only provide money to companies that are first able to secure private capital. And it seems that whole thing about buying up troubled loan packages and reselling them — you know, the plan actually pitched to Congress — has been scrapped. Hank Paulson will hopefully provide some specific details, and receive some tough questions, during this morning’s press conference (which may already be over by the time you read this).

Two quick thoughts in the interim

1. If KKR Financial reorganizes into a bank holding company in order to qualify for TARP, can it gets its private capital infusion from KKR? I’d like to think not, but I’d also like to think that qualifying bank holding companies actually had to be bank holding companies on the day TARP was passed (i.e., a reverse grandfather clause). More than a few people last night joked about turning their family finances into banks, and I’m pretty sure my $20 loan to a friend for dinner qualified as both lending and direct economic stimulation.

2. This plan could have the effect of providing “leverage” to private equity firms that can’t find it elsewhere, and probably at very attractive “terms.” Were I at the press conference, I’d want to know what type of oversight would be on such investments.