No TARP for car companies

Democratic congressional leaders are asking the President to allocate a portion of the Treasury Asset Relief Program, or TARP, to fund the losses and health plan obligations of the car companies. That's a bad idea.

There is certainly a good argument to be made that the car companies need some propping up at the moment but using TARP doesn't make sense for the following reasons:
---TARP is designed to create liquidity for troubled financial assets
---TARP is approved for banks and S&Ls, with a caveat that insurance companies and banks with foreign parents can be added.
---Applying TARP to an industrial company that simply needs to spend the money at once to fund health plans and pay bills is money gone from day one. The TARP plan is to invest money in illiquid assets that will have value over time as markets eventually(in one year or in three years or...) return to a more normal state. Over time there can be a recovery by taxpayers of the investment. There is almost zero chance of any recovery from the auto makers as the Treasury will not be buying any market priced paper of potential value.
---It is important that the TARP $700 billion pool for financial assets be measured and monitored. The ultimate return on the money invested can restore confidence in the system over time. Muddying the waters with industrial bail-outs will make that difficult. As the business adage goes, "If it can't be measured it can't be managed".

As in the case of AIG, the Treasury and the President have multiple ways to approach challenging financial situations and the car industry issue is one that could have huge ripple effects if not addressed. They should, however, not use TARP. The Pelosi and Reid request to use TARP must have some opaque political rationale since it does not make sense on the surface. Could it be that they think the American public will think that it's all ok since they are taking money that's already been approved. Who knows, makes no sense.