The WSJ has an article this evening based on an interview it did with Treasury Secretary Geithner. A lot of it is over-plowed ground but a couple comments jumped out at me that I want to pursue just a little. Indulge me.

First, this is what he had to say about companies repaying TARP funds:

Treasury Secretary Timothy Geithner indicated that the health of individual banks won’t be the sole criterion for whether financial firms will be allowed to repay bailout funds, a position that might complicate their efforts to give back the cash.

In an interview, Mr. Geithner laid out some broad principles, including the need to consider the overall health of the financial system and the flow of credit in judging whether banks can repay their government investment. Among large banks, Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. have both said they want to repay the government.

Think about that for a moment. The government entered into a commercial arrangement with a group of banks. We know that some of them would have preferred not to have been a party to the transaction but they were not offered any option. Presumably there were terms and conditions committed to a legal document that all parties signed.

We know that subsequently the government expanded the terms and conditions of the agreement unilaterally and now we have arrived at a point in time when the some of the banks wish to pay off their obligations. Again I’m presuming that there was some contractual language that specified the manner and under what circumstances the money could be repaid. Taking that a step further, I assume that Goldman and JPMorgan feel that they are in a position to meet those criteria and therefore want to pay off the government under the agreed upon terms. As an aside, I believe that several banks that also received TARP funds have indeed availed themselves of the opportunity to pay off their loans.

So now despite the existence of documents specifying the manner and terms of repayment as well as precedent for doing so, the Secretary of the Treasury announces that he has subjective considerations with which he must be comfortable before he will abide by the terms of the contract which the government entered into. Is there any wonder that no businessman in his right mind wants to partner with these people.

But let’s not get bogged down. Another small piece of this article deserves some notice.

Obama administration officials worry that the repayment of bailout money, combined with a general disinclination toward partnering with the U.S., could undermine their efforts to restore health to the financial sector and the broader economy.

I don’t think we need to talk any more about the “disinclination toward partnering with the U.S.” but the second part of that sentence deserves a little attention.

Generally, government officials recognize that there is a limit constitutionally and practically to the extent of their interference in the economy as well as their ability to make it bend to their wishes. That sense of modesty seems to be missing from this current crop of technocrats. There is little they can do beyond the measures currently in place to repair the economy. It will take care of that itself and any efforts beyond what’s currently occurring is as likely to cause as much long-term harm as good. 

I have the uncomfortable feeling that we have a group of people who are at their first rodeo. They not only don’t understand the limits of their ability to influence the course of the country but seem not to appreciate that their latitude for action is legally limited. Who, if anyone, stands before them and says enough, you are over the line remains to be seen. Increasingly it appears as if we need very badly for that person to emerge.