×

TARP Confusion Coming To Light

In an op-ed piece in Tuesday’s Wall Street Journal Bert Ely of Ely & Co. reveals major confusion surrounding the TARP.

And he pleads with the new administration to sort out the problems before making any more drastic decisions about banks.

Fast Money found Mr. Ely’s case so compelling that we invited him to be our guest on the show.

TARP Confusion

Ely’s concern lies with the question being tossed around Congress - should banks be required to use TARP capital to make more loans?

He says there's widespread confusion about the role capital plays in a bank’s balance sheet. “That confusion is evident in comments such as banks should be forced to lend the TARP monies the government has given them,” he writes.

But banks don’t have to lend TARP money to put it to good use.

According to Ely TARP money on the balance sheet could and should be used in the following three ways:
1) to absorb losses from loans and investments already on its books
2) to acquire banks too weak to remain independent
3) to increase its lending.

He explains all of those things (and not just making loans) will "boost a bank's lending capacity because it enables the bank to safely increase its deposits -- and thus its loans -- without increasing its risk of insolvency.”

And, he also makes the point that people who are good risks can get money. In fact, there's no trouble on that front, whatsoever. Commercial bank lending actually grew $336 billion, or 4.9%, from August to Dec. 24, according to Federal Reserve data.

So what’s the bottom line? “While lending dictates or other restrictions may be tempting, the Obama administration must discourage Congress from imposing them on recipients of TARP investments,” says Ely.

What do you think? Tell us now!











To see our entire interview with Bert Ely please watch the video.

Read More:

> Banks Don’t Need To Be Forced To Lend

______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send your e-mail to fastmoney@cnbc.com.

Trader disclosure: On Jan 6, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Owns (MSFT), (TM), (MOS), (WMT); Najarian Owns (CSCO), (ERTS), (MSFT), (GS), (XLB), (EEM); Najarian Owns Short Calls (MSFT); Najarian Own (NVDA) Long Sread ; Finerman's Firm Owns (MSFT), (EEM), (DNA); Finerman's Firm Is Short (IYR), (IWM), (MDY), (SPY), (USO), (IJR), (BBT), (GNK)