Today's Outrage: The TARP Trap Is Real

I'm troubled by State Street's (STT Quote) announcement that it will sell shares in the hope of being allowed to repay the taxpayer bailout funds it received.

Like the announcements from the other banks that want to repay funds from the Trouble Asset Relief Program (TARP), State Street's announcement includes the caveat "if permitted to do so." That's what troubles me.

We've heard the same thing from Goldman Sachs (GS Quote) and JPMorgan Chase(JPM Quote). The growing list of banks awaiting "permission" to repay the government also includes BB&T (BBT Quote), Capital One (COF Quote) and US Bancorp (USB Quote).

It's not enough that these banks passed the government's "stress test." Nor is it enough that they prove their ability to raise capital by selling shares. There is a whole application and approval process - probably involving reams of paperwork filed in triplicate -- to repay TARP funds.

It's hard to escape the conclusion that the Obama Administration doesn't want to sever the strings that are attached to the TARP funds. As long as the banks owe the government money, the government gets to call the shots.

That kind of control is more immediate and more absolute than the messy process of passing laws or writing new regulations.

It's an interesting reversal of traditional power brokering. Not too long ago, the bankers sought to gain leverage over politicians by giving them political funding. Now the politicians have gained leverage over the bankers by giving them bailout funding.