Make no mistake, if banks were to use bailout money to pay dividends, it would be an offense to the taxpayers who thought their money was going to be used for lending. And House Financial Services Committee Chairman Barney Frank (D-MA) is right to object to that possibility.

But the statement he released Friday is just a little too ironic to go without mention. “Any use of the these [sic] funds for any purpose other than lending—for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.,” says the Chairman, “is a violation of the terms of the Act.”

A violation of the terms of the Act, huh?

Y’know, the Troubled Asset Relief Program was created “to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution.” But, right after the law passed, the administration turned on its heel and started buying pieces of the financial institutions themselves. This was an offense to the taxpayers who thought their money was going to be used for buying troubled mortgage assets.

It’s hard to find Chairman Frank’s objection to this violation of the Act. Some of his thinking was captured in a CNN.com article:

Rep. Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, also backed the plan to buy equity in banks, saying it was “conceptually easier” than implementing the government plan to buy off bad mortgage-backed securities.

I guess some violations of the Act are better than others.

How come government officials get to bend the bailout law, but banks don’t? Such is the nature of power, I guess.

Again, I’m not in favor of banks using these funds for dividends. But I’m a fan of irony, and an opponent of hypocrisy, which we seem to be seeing here. The $700 billion of our money that Congress committed to this bailout is little more than a slush fund.