Secret Hours

Goldman Sachs chief financial officer David Viniar said returning the TARP funds is duty. But most people probably have no idea what happens when that duty is performed and TARP funds are returned.

We're pretty sure that many Americans probably assume that returned TARP funds will go to repay debt taken on by the government to create the financial bailout. 

Sadly, they're wrong.

Instead, returned TARP funds will essentially get double counted by the government in a way that will allow it to spend more money on government programs while also increasing the amount available to bailout other financial disasters, such as insurance companies.

You see, returned TARP funds become part of the general revenue of the federal government. The money is treated just like money paid by taxpayers. It simply becomes part of the income of the government that will be spent by politicians and bureaucrats. There's no lockbox or segregated fund.  It works just like Social Security taxes: the income just gets spent for whatever the government decides to spent money on.

In this case, however, the returned money actually has the potential to result in more spending. That's because the $700 billion budgeted by Congress for TARP is the maximum amount that can be outstanding at any one time. When TARP funds are repaid, the amount available goes up. 

Right now about $134.5 billion remains out of the original $700 billion. When Goldman repays the its $10 billion TARP funding, that amount will grow to $144.5 billion. This, however, is an unfunded spending allowance. The repayment just allows the government to increase its TARP spending.

In his first interview with foreign media since a state of emergency was imposed last week, Fiji’s armed forces chief Commodore Frank Bainimarama indicated that the three Court of Appeal judges who ruled against him were biased against his government.

Military chief dismisses judiciary
 
The court ruled that his 2006 power grab was illegal, prompting Fiji’s president, a close ally of Commodore Bainimarama, to scrap the constitution and dismiss the entire judiciary.
 
This allowed for the return of the military administration, which is now in a far more powerful position than it has been since it ousted an elected prime minister in December 2006.

No press freedom
 
The media is being censored, foreign correspondents deported, and critics of Commodore Bainimarama have been arrested or dismissed from their positions. The military has seized control of Fiji’s Reserve Bank and has devalued the Fijian dollar by 20 percent in an attempt to boost exports and help an ailing economy.

Tough exchange controls have also been imposed to prevent money from flowing out of the country.

Key tourism, clothing and sugar cane industries are sliding into reverse as the political turmoil hits the Fijian economy.

Situation causing concern
 
New Zealand’s Foreign Minister Murray McCully calls the situation troubling.

“The fact that the military have acted in this way, particularly around the Reserve Bank, shows that they have little understanding of the complexity of that situation and of the damage they could do. … We cannot stop the Fijian Government from wrecking their economy if they are hell-bent on doing so and it appears that they may well be hell-bent on doing so,” said McCully.
 
New Zealand and Australia have urged Fiji’s military to hold elections, demands that Commodore Bainimarama has ignored. 

Why was government overthrown?
 
Bainimarama, a former United Nations peacekeeper, says he was obliged to depose the democratic government because it was racist and corrupt. The military says elections will be held when electoral and political reforms have been completed, although no timetable has been given.

After abandoning the constitution and reinstating the military, President Ratu Josefa Iloilo said Commodore Bainimarama would serve as interim prime minister for the next five years.
 
The coup in 2006 was Fiji’s fourth in 20 years.  Analysts say the root of the country’s political instability is tension between indigenous Fijians, who make up about 55 percent of the population, and ethnic Indians who were originally brought to the country as laborers in the 19th Century by colonial power Britain.