Dear Commons Community,
The Huffington Post has an interesting article on the nature of the repayment of federal bailout (aka TARP) money by the banks and financial services industry. There has been a lot of grumbling about the government bailing out banks during the financial crisis especially among the Republican presidential candidates. We could at least take some comfort in the idea that the government has turned a profit on this bailout. The only problem is, that profit comes from other taxpayer money — money that was meant to spur banks to develop communities and help small businesses. Instead they’ve used it to develop and help themselves.
The article explains:
“All told, including dividend, interest and other payments, U.S. banks have repaid the government $211.5 billion under the Capital Purchase Program (CPP), the first phase of the government’s Troubled Asset Relief Program (TARP), according to a report Thursday by the Government Accountability Office, a congressional watchdog. That’s more than the $204.9 billion the banks initially got under TARP.
$211.5 billion minus $204.9 billion equals profit, right?
But 48 percent of the banks that have repaid the CPP used money they’d gotten from other federal programs, according to the GAO report. Those programs include the Community Development Capital Initiative — another TARP program — and the Small Business Lending Fund, a program designed to encourage lending to small businesses. Both of those programs have more favorable borrowing terms for the banks than the original CPP…
It may be unfair to quibble with the Treasury Department’s claim that the government is making money on TARP. After all, the bailout was not meant to be a get-rich-quick scheme. It was meant to stop the financial sector from collapsing into a giant black hole that was going to suck the global economy inside of it.
But it is worth remembering that the banking sector is where it is today thanks to the good graces of American taxpayers, who are still on the hook if these banks can’t pay back the money they’ve borrowed to stay afloat.”
OR if they continue to use other federal grant programs to pay back their original loans. This is akin to a Ponzi scheme?
It is time for Occupy Wall Street to start up again!