Squaring the Tarp circle

The US may have found a way out of its bank recapitalisation bind. The administration knows it will struggle to get Congressional approval for more bailout cash. Going to Congress and being rejected would be horrific. But if the government’s stress tests – which are due to be completed next week – don’t lead to more capital injections, they will be branded a whitewash. And failing to recapitalise the banks adequately would result in zombie institutions haunting the land and so risks prolonging t...