Wednesday, June 23, 2010

Banks have repaid about 75% of TARP funds, Geithner says

Given the discussions I've had with some regarding TARP, I thought this article was particularly interesting. I  greatly fear, though, that the $700 billion that's been repaid simply will be spent again by folks like Barney Frank, as discussed in one of my posts below.

Here's the salient quote from the article:
"Mr. Geithner told a watchdog panel that banks had repaid about 75 percent of the bailout money they received, and the government’s investments in those banks had brought taxpayers $21 billion."


  1. I "love" this line.

    "TARP “has helped restore financial stability at a much lower cost than anticipated,” Mr. Geithner said in his testimony."

    For four reasons that line is nonsense.
    1. We are still in a recession.
    2. There is no financial stability. Because businessmen have no idea what government might do next, they hesitate to invest.
    3. What good were Geithner's cost projections? At best TARP constituted a journey into uncharted territory. At worst, TARP was nothing but robbery, CYA for people the government encouraged to make financially unsound decisions.
    4. Because our leaders never corrected the problems that led to TARP, we are setting ourselves up to do the same stupid thing all over again.

  2. Anyone who thinks TARP is the problem is dreaming.

    TARP was/is an attempt to deal with the more fundamental problem and it's effectiveness is arguable but the reason why business is in trouble is that they cannot access credit because the folks who provide credit still own a lot of toxic and severely devalued assets - not only residential but commercial.

    Whose caused this to happen ?

    Can the govt play any role in fixing it?

    If the govt stays out of it, will it lead to massive failures of financial firms including commercial and community banks?

    You guys live in a dream world IMHO.

    What is the reality here?

    If TARP goes away like you advocate, what will happen?

    Are you really in favor of having thousands of commercial and community banks failing?

  3. Well, you're both right and both wrong.

    Tom, TARP did stabilize the banking industry. Remember how you couldn't get a jumbo mortgage AT ALL in late 2007

    Larry, TARP has "gone away" in that no more banks are taking it and it's just in a process of repayment at this point. And the world did not end when it "went away."

    However, you are right that small banks continue to fail - hundreds by the end of this year. And, Tom, you're right, too, in that the financial reform bill does nothing to prevent this from happening in the future. In both of those cases, though, that's just the price of doing business in a free market.

  4. the bigger question is - did the govt have a legitimate role BEFORE in doing the TARP (was the TARP a legitimate govt function)

    .. and NOW.. since the problem is still an issue...

    .. should the govt stay involved in some way to try to continue it's efforts?

    I don't pretend to know all the answers.. but I resent the continuous anti-govt mantra coming from the right when I think it is clear if we had done what they say they support, we'd be in the midst of one of the greatest Depressions seen on this earth.

    Most economists, even the ones that were initially circumspect on the TARP, now accept the TARP as necessary.

    I just want to see the right wingers be a little more honest about this.

  5. Lloyd - TARP sets yet another precedent that just worsens an inherently unstable situtation. TARP just adds another layer to a house of cards.

    Our economic system can only achieve stablility by making each citizen responsible for managing his own wealth. TARP is about making government responsible.

    What the Founders sought is to make each of us the captain of his own fate. The Founders wanted each of us to have the right to private property; they wanted each citizen to earn his own wealth and risk it as he saw fit. That means we can make good or bad decisions, and we each accept responsibility for the consequences of our own choices.

    Our government, via crony capitalism and now socialism, has undermined what the Founders created. Instead of being the captains of our own fate, we have put politicians in charge. In return, these politicians have promised to eliminate risk. That, as TARP itself proves, is a promise they cannot keep.

    When government risks our money, it is about politics, not economics. And nobody learns anything. That is because the consequences fall on somebody else. Instead of risking our own money, we risk other people's money. Because of politics, we end up spending our national wealth on things we don't need, bailing people who will continue to make the bad decisions that government encourages them to make, and throwing money at institutions that should be allowed to fail.

  6. Lloyd, what did the founders intend with regard to FDIC?

    Do you support the concept of the FDIC or not?

  7. @Tom, the Founding Fathers in their agrarian economy of 240 years ago never contemplated anything like the intricate financial products we have today. Heck, even the 30 year mortgage was more than 150 years away. I still agree with you that banks, like any other enterprise, should succeed or fail without government interference. However, with the complexity of today's financial instruments, we've seen that ordinary people and small businesses can be profoundly affected by bad business decisions made by unrelated parties.

    @Larry, I like the concept of the FDIC, but I would do it differently. Deposit insurance would be underwritten by private companies. Those private companies then would have a profit motive in ensuring the banks did not fail. To ensure that depositors maintained faith in their banks, the insurance would be guaranteed by the federal government though the insurance companies themselves would not.

  8. so you basically believe in the govt being involved in this activity - as opposed to you being opposed to it being involved at any level?

    Which means you support the basic concept of FDIC to protect consumers of financial services?

    bonus question:

    so you'd support private companies issuing credit default swaps as long as the government "insured" them?

    Sounds to me like you think the govt should be involved in "saving" companies... you just want a different method but support the basic - FDIC concept.