Now that the DISCLOSE Act is dead (one hopes), the next item on the Senate’s agenda is a package of subsidies for small businesses. The key measures in this package passed the necessary procedural hurdles last week while we were all distracted by Shirley Sherrod and Journolist, so final passage at this point looks to be a formality. The most controversial measure was a $30 billion TARP-like government lending program that is supposed to provide credit to small businesses, indirectly, through government purchases of preferred stock in community banks. I think this is a terrible idea, and I make the case against it here. Republican senators George Voinovich and George LeMieux were wrong to support it.

The thing I find most troubling about the lending program is that its enactment into law will signify the acceptance by our political class of an unacceptable role for the government in the banking system. The politicization of bank lending was one of the top, if not the top, concerns of those who opposed the TARP legislation. Politicized bank lending doesn’t suddenly become a good thing just because you have small banks doing the lending, ostensibly to small businesses. There are good reasons to believe that such lending will be more prone to fraud, waste and inefficiency, not less.

The other measures in the package enjoyed broader bipartisan support, but most of them were bad, too. Over on Exchequer, Kevin Williamson explains why.

* “It’s a TARP!” headline shamelessly stolen from Dan Foster. The uninitiated can click here to learn more.