Tuesday TARP Day
The big news of today was all about the repayment of the TARP funds.
If you recall, the Troubled Asset Relief Program was part of the $700 billion Bailout Plan whereby the government saved our troubled banks by injecting about $200 billion in return for equity shares. That was back in October 2008 and initial estimates held that only about $25 billion would be repaid in 2009.
But today 10 banks announced they will pay back $68.3 billion of it. Each raised enough capital and/or passed the “stress tests” (which determine how much money the bank will need to survive in the event of economic collapse), and the Treasury has thus granted them permission to repay.
Apparently, this repayment is a signal of improving conditions and that the new financial recovery plans are working (or so they tell us).
But The Big Picture takes another view:
The rush to repay TARP monies gives us another opportunity to consider why the hell this absurd financial giveaway ever happened in the first place. A close inspection suggests some dishonesty on the part of the prior Treasury Secretary.From its inception, the TARP never made much sense. Forcing banks that did not need money to accept government bailouts was simply irrational.
In Bailout Nation, we discuss the possibility that The TARP was all a giant ruse, a Hank Paulson engineered scam to cover up the simple fact that CitiGroup (C) was teetering on the brink of implosion. A loan just to Citi alone would have been problematic, went this line of brilliant reasoning, so instead, we gave money to all the big banks.
I love conspiracy theories. Except when they involve my money!
