NPR’s Planet Money broke the story in September that the TARP program, a.k.a., the “Wall Street Bailout”, included a provision to buy equity in banks, which was not only unknown to most observers it was unknown to most members of Congress who voted for it (classic). NPR has finally reported on the back story of how it happened “in their podcast”:http://www.npr.org/blogs/money/2008/12/hear_700_billion_bailout_myste.html.
Henry Paulson didn’t want it included because he believed government-owned companies are to be avoided, but it went in anyway thanks to the work of Jim Moran, a Virginia Representative, and Spencer Bachus, a Representative from Alabama with support from Barney Frank. It was so unwanted in the bill that the wording was vague to not draw attention to it. The interesting thing about it is not that it’s just a much-better idea than buying toxic debt (as I mentioned “here”:http://troyandgay.com/blog/2008/10/09/a-better-bailout/), but that Paulson reversed his opinion and is only buying equity in banks instead of toxic debt and the reversal is credited with avoiding a banking collapse that his original plan likely would not have avoided.