Tuesday, April 21, 2009
TARP baby
The TARP turns out to be a tar baby (bold emphasis added).
Treasury Secretary Timothy F. Geithner said yesterday that the "ultimate test" for determining which banks can repay government bailout money is whether the entire financial system is capable of offering enough credit to revive the economy...
[T]he banks say federal bailout money, which requires firms to restrict executive pay and submit to other limits, now carries a stigma. Several of the firms, such as J.P. Morgan Chase and Goldman Sachs, have been lobbying the government to be released from the bailout and have taken steps to repay the money.
Geithner said his primary responsibility is to consider the well-being of the entire financial system, rather than the health of individual companies. The federal government can reject requests from banks that want to repay the money.
At least Secretary Geithner is speaking some truth: The TARP has little if anything to do with rescuing particular financial institutions. It is about using the banks, in some cases essentially against their will, to promote easier money and looser lending standards. So can we stop calling it a "bailout"?
2 Comments:
By 
Georg Felis, at
Tue Apr 21, 11:39:00 PM:
Ok, trying to wrap my mind around this. My bank was smart, and did not get involved in the disaster, and therefore is healthy. The Government forced it to take bailout money, so the other banks that screwed up would not look bad. This bailout money came with strings, that prevent my bank from paying the salaries to attract the talent to manage their money well.
So now my strong smart bank has been changed to a weaker dumber bank with excess cash that it must invest in a stupid way that got all the other banks in this trouble in the first place.
Tell me why I should thank Our Beloved Leaders now?
By 
, at
Wed Apr 22, 06:41:00 PM:
Don't you just love the subjective criteria Geithner uses to determine when the banks will be allowed to repay the TARP funds? My guess is that they will never be allowed to pay back the money. Owning a percentage of the banks just opens up way too many opportunities for mischief for Government. I don't believe Government will be quick to surrender that leverage. Thanks a bunch Dubya.
