John Carney, writing for Business Insider, is mad as hell that banks are using billions of dollars in TARP funds to cushion their capital rather than spur lending. He's right: Banks do appear to be using TARP funds to recapitalize rather than lend money, and I wish that wasn't the case. But is he right that slower lending makes the TARP funds -- and the entire bank bailout -- one "big, fat lie"? No.

Carney seems a little confused -- or at least, he's confusing me. He writes "There's simply no way the government could use capital injections to spur lending into a recessionary economy." But that doesn't make the government a bunch of liars, for two reasons. First, money is fungible and it's very difficult to track dollars sent from Washington to Wall Street to companies seeking credit. Second, the lending market requires both supply of capital and demand for credit. Unless Carney is sitting on evidence that banks are ignoring a widespread clamoring for increased lending, it seems weird to blame the administration for a slow lending market.

And wasn't the first goal of TARP always recapitalization? Richard Neiman, a committee member charged with evaluating TARP, told the WSJ that there "is no specific reference to increasing lending" in the original TARP legislation: The program was about stabilizing the markets, first and foremost. I went back to the speech that former Treasury Sec. Hank Paulson made about the TARP program's priorities in November 2008, and that seems to be the message:

First, we must continue to reinforce the stability of the financial system, so that banks and other institutions critical to the provision of credit are able to support economic recovery and growth. Although the financial system has stabilized, both banks and non-banks may well need more capital given their troubled asset holdings, projections for continued high rates of foreclosures and stagnant U.S. and world economic conditions.

Finally, Carney finishes in a flourish.

What else could they [the government] have done? Very simply, we could have allowed failing firms to fail, wiped out shareholders, devastated bondholders, seized depositor assets, perhaps while increasing liquidity to make sure healthy financial institutions had enough cash on hand to deal with any panic.

Perhaps while increasing liquidity! Allowing enormous, hundred-billion-dollar banks like Merrill Lynch to fail -- very simple, and utterly sensible. Provide trillions of dollars through the Federal Reserve and TARP, essentially the two crutches that have kept the American economy from falling on its face -- somewhat optional? I'm not sure how to respond to that. On the one hand, that paragraph is living in a world of counter-factuals, so I can't really debate it. On the other hand, even living in a counter-factual world, it doesn't even pretend to offer evidence that letting Merrill Lynch, Countrywide, Wachovia and Washington Mutual fail would be good news for the lending market.