There’s a range war happening in the West over the government’s draconian demands on local banks in return for TARP funding.

Already, large banks such as Northern Trust and Wells Fargo have indicated they would like to give the money back. Smaller banks as well have put the government on notice that restrictions on pay, on lending or on other behavior that accompany TARP are arbitrary, capricious and unfair.

As we have argued before, this ad hoc program, with rules made up out of thin air as crisis after crisis unfolded, is outliving its usefulness.

The government needs to fold up this TARP and replace it with rules that give banks the flexibility they need to operate effectively — with or without the government’s help.

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