TARP Repayment Terms MUST Preclude Future Support

The "Gang of 19" and other U.S. banks which accepted hundreds of billions of TARP recapitalization funds - taxpayer money borrowed from our BFF China - since October 2008 now are growing impatient to return the money to Uncle Sugar. Stress tests were graded Pass-Pass last month after fantasy Q1 earnings were reported and accommodating capital markets have allowed the largest of the "Too Big to Fails," (TBTFs) with a couple notable exceptions, to bring debt and equity offerings fast and furious to a newly eager investor crowd. Even the much-heralded PPIP (really, MLEC 3.0) designed Rube-Goldberg-like to extract toxic waste from bank balance sheets and fob it off on an unsuspecting public, replete with more-than-generous fee comps for the "managers" now is DOA, having recently been euthanized by the FDIC as no longer necessary.

The Anecdotal Economist is all in favor of now-healthy financial institutions, courtesy of bogus Q1 earnings (huge wind assists from AIG derivatives unwinds, trading profits, mark-to-make-believe and the best, right Citi?, theoretical discounted debt buy-back gains), repaying the government and getting on with the business of fleecing credit card customers and mortgage refinancers and a rapid resumption of unrestricted, astronomical pay and bonus plans, but the fine print of the TARP repayment term sheet must contain one vital provision:

Any bank repaying TARP funds must forever be barred from receiving any and all similar government aid in the future.

TARP, if repaid, has to be an one-off for the TBTFs. When If the economy continues to head down the crapper, if the green shoots turn out to be weeds, if the green shoots get scorched, if home foreclosures double - again, if credit card default rates hit 20 percent, if personal and business bankruptcies double - again, if unemployment reaches 12 percent, if states, counties and municipalities go broke and tax revenues at all levels evaporate, well...boo-frigging-hoo, too bad for you.

Are you listening, Government Sachs? Did you catch that, Jamie? Taking notes, Kenny? If you pay back the TARP - THAT'S IT. No more government rescues again, ever.

So if, in future quarters, your metrics go south and you begin to report crappy results - again - and the shorts come after you with a vengeance - again - and it turns out 2009 earnings really were make-believe, do not demand expect another gift from Timmy, Ben and Sheila (and Larry and Bob).

If there needs to be a next time, to again save the TBTFs, the U.S. economy and the world from financial armageddon and meltdown, we respectively request it be done the old-fashioned way: Failing banks must be seized, management and boards must be dismissed, common and preferred stockholders and unsecured bondholders wiped out, toxic waste removed and new, solvent institutions re-opened. The FDIC has done this for billions of years. It can do it again.