The problem with restrictions on TARP funds

As has become something of a pattern for me on economic issues, consider this little more than a distillation of much more qualified services. There is, however, a lot of indignation about how federal bailout/rescue money is being used, so in the spirit of Defending the Undefendable, I offer this explanation of why more direct oversight and control is at best difficult, and perhaps undesirable.

Problem 1: The cost of accounting
One of my favorite comments on this subject has been: "If I loaned my kids money, I'd want to know what they are doing with it." In this case, the "kids" are about 100 (I think) banks and other lending institutions that need money to continue doing things that banks do like pay off their loans, keep branches open and make loans. However, while it's relatively straightforward for a parent to keep track of minor children's disposition of considerably less than the household income, tracking multiple institutions' use of funds intended to keep them solvent requires a fairly large and dedicated staff, and the decision was made to favor making funds available for use over strict oversight. Plus, no business wants to make its internal workings public knowledge for competitive reasons. The theory was that in order to be effective, this recapitalization had to be embraced by banks before they got into serious trouble, and requiring strict and public accounting for their capital expenditures would discourage banks that should seek help before they became another crisis.

Problem 2: Paying of dividends
The disbursement of chunks of money to shareholders, called paying dividends, is usually associated with profitable companies looking to make their stock more attractive so they can expand. In lean times, such things that boost stock price at the expense of the capital holdings of the company are generally considered bad, doubly so when the capital the company is holding comes from taxpayers.
However, it is precisely the sale of stock at a decent price that allows a company to replenish its capital reserves. So, if you offered a dividend of $.25 when your stock cost $60, your investors got a return of .41%. If your share price falls to $4, investors can now get 6.25% plus any stock appreciation. When equities are offering better return on capital than certificates of deposit, it is much easier for institutions to recapitalize by issuing new shares. Thus, demanding that dividends not be paid, and thus pushing down the stock price, undermines the whole point of a recapitalization program.

Problem 3: Executive Pay
There's a fallacy hard wired into the brain that cost equates to value. Add to this the fact that few people have significant loyalty to their employers and you have the history of executive pay over the last twenty years. So, the fact that the CEO of a company makes 420x the gross income of the lowest paid employee does not mean that his (generally) leadership is worth 420x the input of the peon, but the peon just needs enough to get by while keeping the management team from getting bought means paying more. Thus, right when the industry most needs bright people who have some clue is hardly the time to start paying them less.
On the other hand, a very strong case could be made that the coming transition in banking is going to be as significant as the transition the computer industry made from the days when everyone had to work in assembler to the early days of higher level languages. At that point, almost all of the old staff had to be fired because the new techniques and mentalities were diametrically opposed to the old ("What is this 'commenting' you speak of? Readability, who would ever read code?"). However, that is something markets can decide better than governments, the latter simply being there to ensure the new rules are followed.