No shock: TARP funds used by banks for expenses, acquisitions
posted at 12:57 pm on July 20, 2009 by Ed Morrissey
Get ready for another IG to go under the bus. Special Inspector General Neil Barofsky, who has recently made headlines in a squabble over his independence from Treasury for his mission on the TARP and bailout funds, reported to Congress that the banks receiving TARP funds did not use the money to loosen lending, as intended. Instead, they used the money to buy other banks, pay off their own debt, and make other investments:
Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks, according to a new report from the special inspector general overseeing the government’s financial rescue program.
The report, which will be published Monday, surveyed 360 banks that got money through the end of January and found that 110 had invested at least some of it, that 52 had repaid debts and that 15 had used funds to buy other banks. …
Officials have taken the view that the exact use of the federal aid cannot be tracked because money given to a bank is like water poured into an ocean.
“Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient,” Herbert M. Allison Jr., the assistant Treasury secretary who administers the rescue program, wrote in a letter to Barofsky.
Originally, the TARP bailout intended on having the federal government buy back the toxic assets on the books of major financial institutions, mortgage-backed securities created by mandate of Congress, in order to stabilize their balance sheets. After winning approval for that from Congress, the Bush administration simply changed the rules and gave away the money (and at least in a couple of cases, strongarmed the banks into taking it) rather than alleviate the cancer at the heart of the financial system. They claimed, as did the Obama administration afterwards, that the TARP funds would unlock lending and revitalize the economy.
Surprise! The banks have begun turning big profits, mostly by getting a lot more choosy about their borrowers. They used the money to their own benefit, as one would expect, through acquisitions and debt pay-downs, which have undoubtedly stabilized the financial institutions but did little else for the economy. Lending has returned to the basis on which it should have operated all along — lending money to low-risk borrowers with the means to pay off the loans on time. But that is not what both administrations promised with TARP, and Barofsky’s data shows just how much of a waste the twisted TARP became.
Now, rather than brag about unlocked lending, the Obama administration wants to claim that we can’t tell how the banks used the money, because all cash looks the same in the money ocean. Well, that’s only true as long as Treasury doesn’t do any diligence on TARP spending and lending, the very problem Barofsky reveals. It’s a tautology; Barofsky says that there isn’t enough transparency on TARP distribution because Treasury doesn’t demand it, and Treasury says transparency isn’t possible because they’re not demanding that kind of reporting. Accounting exists to provide that kind of transparency, but apparently Treasury and the White House simply have no interest in it.
Blowback
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No surprises here.
MaiDee on July 20, 2009 at 1:02 PM
My lending officer at the mid-sized bank my company uses said as much (the government intended healthy banks to buy unhealthy banks) last year…before Obama was even elected.
But the federal government will get it right next time on _____________ (noun).
- Helath Care
- Cap and Trade
- ????
WashJeff on July 20, 2009 at 1:02 PM
Huh.
Akzed on July 20, 2009 at 1:04 PM
Any conservative feel like apologizing for their support of TARP, yet? Anyone?
lorien1973 on July 20, 2009 at 1:04 PM
Just paying back the donors…Its the Chicago way. You ignorant drones that thought BO was going to give you something got duped big time.
daesleeper on July 20, 2009 at 1:04 PM
Well, hang on to your wallets folks. The commercial real estate bubble is about to burst to the tune of $700 billion.
forest on July 20, 2009 at 1:06 PM
TARPTRAP.
/fixed it
dont taze me bro on July 20, 2009 at 1:06 PM
Government and banks acted as expected.
myrenovations on July 20, 2009 at 1:06 PM
Most transparent government evah….
There, said it for you
catlady on July 20, 2009 at 1:06 PM
The fungibility argument falls flat when one realizes that some of these banks would probably not be in business today had they not gotten bailouts. One can say that it is like money in the ocean, but it was more like a puddle in the desert. Then, the discussion turns to whether the current use of available funds conforms to the intent of TARP. I am not defending the bailouts; on the contrary, if the banks can afford acquisitions, they can afford to pay back the money.
Vashta.Nerada on July 20, 2009 at 1:06 PM
The article is populist crap.
Banks have reserve requirements that prevent them from lending.
I am pro-capitalism. How about you?
faraway on July 20, 2009 at 1:07 PM
The government forcing banks to lend to unqualified borrowers was the problem in the first place. We don’t need more government involvement in banking, health care, or cap and tax.
d1carter on July 20, 2009 at 1:09 PM
And meanwhile, back at the ranch, it appears CIT is going to try and bail themselves out since the White House said “no way”. I believe CIT is the largest lender to small business.
CIT, founded in 1908, is a lender to around one million mostly small and midsize businesses ranging from restaurants and private schools to clothing makers. It also leases railcars, aircraft and equipment, and has a large business providing cash to manufacturers and collecting on their invoices.
For years, CIT funded its activities largely by selling bonds — only to find itself in trouble when credit markets froze up a year or so ago.
But enough with the misused TARP funds Comrades, we need to get off the computer cause Barry is going to speak yet again on healthcare.
Knucklehead on July 20, 2009 at 1:10 PM
One point that has not been addressed in the TARP debate from the standpoint of unfreezing consumer lending is the fact that the majority of the consumers were so over-leveraged that they could not take on any more debt. In addition, over the past several months, the savings rate has grown substantially. Until consumers get de-leveraged, and confidence in the economy grows, consumer lending will remain to be depressed.
ICBM on July 20, 2009 at 1:11 PM
And welfare people spend their gov’ment, my, money on tobacco and booze.
davidk on July 20, 2009 at 1:11 PM
faraway on July 20, 2009 at 1:07 P
What???? If a bank received TARP funds and then turned around and acquired other assets, or paid down their debt, this is not the appropriate use of the money given by the government.
The greater issue is the lack of accountability that is pervasive in this whole system. Treasury should be kicking these banks rears to get the numbers showing exactly where the money went. This is not rocket science, there are transaction logs that show exactly where the money went.
catlady on July 20, 2009 at 1:12 PM
I wonder what kind of excuse the bummer administration will find to fire this IG.
farright on July 20, 2009 at 1:12 PM
For at least a decade, people have been leveraging themselves within a [housing] economic framework built upon fraud. Congressionally mandated fraud.
Now the fraud is revealed, and valuations start adjusting downwards, many people are going to find themselves beached as the high tide recedes.
There’s no getting around the fact that Congress (mainly Democrats) has fraudulently saddled millions of people with unsustainable debt.
They should all join Madoff in jail.
LimeyGeek on July 20, 2009 at 1:12 PM
It’s still going to get spun as “those greedy Republicans” blahblahblah.
Bastards.
bluelightbrigade on July 20, 2009 at 1:13 PM
Special Inspector General Neil Barofsky sniffs glue while cradled in the fetal position under his desk, anonymous sources report. He was crazy, CRAZY I tell you…and had to go. /sarc
I thought Sheriff Biden was supposed to be watching over the stimulus money. What happened to that?
RR
ramrants on July 20, 2009 at 1:13 PM
Special Inspector General Neil Barofsky had better watch his back. We’ve already seen what Obama does to IG’s who expose his shady operations. How long before we start reading MSM stories sourced by “highly placed Administration officials” (anonymously, of course) about how Barofsky was showing up drunk for meetings, screaming obscenities at subordinates, giving rambling and nonsensical speeches . . . . ?
AZCoyote on July 20, 2009 at 1:14 PM
I add, what needs to be built? There are still plenty of homes out there including many foreclosed relatively new homes. Strip malls? Office buildings? Warehouse buildinds? I know in Chicagoland we got plenty of everyting ready for occupants.
Lend money for what??????
WashJeff on July 20, 2009 at 1:15 PM
That’s no surprise. They were talking about the commercial real estate bubble bursting just a couple of months after the first bailout was passed.
MobileVideoEngineer on July 20, 2009 at 1:15 PM
Wow, this is not news or is it just that now someone is admitting they are idiots.
Wachovia and others reduced or declined credit, lines of credit shortly after getting their money. Not lending… yea. They reeled in all of their outstanding lines of credit and created a big mess for small businesses.
THEN, when the federal government started talking about regulating credit cards.. they started cutting their available credit limits. regardless of your standing with them or your payment history… This country and the banking and credit industry is a mess. Mostly created by the government..
You want them to schedule your doctor visits.. sure.
workingforpigs on July 20, 2009 at 1:17 PM
TRAPCRAPNOW it is fixed, bro. :-)
Banks have sucked at extending credit. Actually, one of my banks has lowered my credit line because of delays with a completely different credit card company. Stingly is one word for it…
cannonball on July 20, 2009 at 1:17 PM
I predict a rise in ‘accidental’ house fires…and insurance claims.
LimeyGeek on July 20, 2009 at 1:17 PM
+ eleventy majillion
cannonball on July 20, 2009 at 1:18 PM
Not to worry..Geitner has got his TaxCut fired up and he’s all over this!!!
BigWyo on July 20, 2009 at 1:18 PM
Banks were required to pay down debt or reduce expenses (in order to meet the Federally mandated reserve requirements) BEFORE they could loan.
Don’t blame the banks.
faraway on July 20, 2009 at 1:18 PM
Wachovia extended my credit significantly. Go figure. I must be ‘super-prime’ or something ;)
LimeyGeek on July 20, 2009 at 1:19 PM
but those homes are sequestering carbon. If they burn the houses, the carbon will be released into the atmosphere. GOD help us!!!!
WashJeff on July 20, 2009 at 1:22 PM
I would have simply given every business and every individual significant tax relief then watched the economic engine of this nation redline as the clutch was released and the front wheels were snatched off the ground as she accelerated into 20,000 down on Wall Street. Alas, the fuel lines were cut and she shuddered to silent right there on the starting line.
jimmy2shoes on July 20, 2009 at 1:22 PM
this shoulod make the sit down between 25 top servicers of mortgages and Timmeh and Donovan of HUD at the WH interesting…
The WH has egg on their faces over the MakingHomeAffordable program which has done jack shxt on mortgage mods and Team TOTUS is sitting on 50b marked to stop foreclosures and no foreclosures are stopping…0.00 of those funds have been spent..
critters are losing track of their voters. Cant have their voters leaving home, how will ACORN do their voter fraud if we cannot find the voters, lol…
TOTUS new upcoming plan is to take the houses from the banks and pay rent for the homeowners..
That would be we taxpayers paying other peoples rent to stay in homes now owned by Uncle Sam
we should have done HOLC last September when Hill recommended it. We OWN Fred/Fan anyway. This will just be more money mo money mo money down the rabbit hole…
ginaswo on July 20, 2009 at 1:23 PM
One little thing that no one has mentioned: why would Treasury require audited accountability on how TARP money was spent, when they haven’t required audits of recipient banks to see EXACTLY how many “un-performing” (i.e. crap) loans are on their books? THAT little item remains unresolved, sitting in the shadows…waiting…..
bradley11 on July 20, 2009 at 1:23 PM
They forced alot of banks to take TARP out of “Patriotic duty”, so as to stop bank runs on the banks that really needed it.
Plus, it started to become apparent quickly that the way things were heading Credit would start to dry up quickly and this was an avenue for funding
jp on July 20, 2009 at 1:23 PM
…which will help warm the earth and offset the costs/taxes we would otherwise pay thanks to cap&tax! Obama is a GENIUS!
LimeyGeek on July 20, 2009 at 1:24 PM
Can we now question the competence and wisdom of the “community organizer” who spent about three hours in the senate?
But they weren’t required to squander away billions making new investments or purchasing other troubled banks.
fogw on July 20, 2009 at 1:24 PM
Amen.
Lets not forget, as we have already begun debating who to nominate, elect and reeelect in ’10 and ’12, that TARP was a GOP/Democrat coproduction. Meaning there were and are within the GOP people capable of doing great damage to our econonmy in the name of helping it.
Do not put such people in leadership positions. NO way I will support anyone who claims they will do a better job of “running the economy.”
james23 on July 20, 2009 at 1:25 PM
Obama and his administration are incapable of the truth. It was obvious to anyone with a double digit IQ, but I guess no one was paying attention.
volsense on July 20, 2009 at 1:25 PM
the ridiculous STRESS TESTS forced the banks to increase tier i capital ratios….the regulators were telling them not to lend and increase capital while the critters are funding slush funds to ACORN housing counselors who then demand modifications the banks will not agree to…
IOW a cluster fxck
and PS those vaunted stress tests did not forecast Unemployment over double digits, should get interesting….
ginaswo on July 20, 2009 at 1:25 PM
POTUS & TOTUS now performing live on TV.
Put on your BS repellent.
fogw on July 20, 2009 at 1:27 PM
that sit down at the WH with the mortgage servicers is scheduled for July 28th BTW….
ginaswo on July 20, 2009 at 1:27 PM
alot of that going around these days.
Rolling Stone had an amazingly ignorant/dishonest piece on Goldman Sachs recently, then Glenn Beck joined in on the GS blaming circus.
They are trying to now claim that GS created basically all the Asset bubbles of recent memory which is absurd
jp on July 20, 2009 at 1:27 PM
Get off the computers Comrades, our Precedent is speaking on the boob tube about healthcare once again.
Knucklehead on July 20, 2009 at 1:27 PM
I always wanted to know what America would look like while being politically managed by a bunch of special-ed rejects.
LimeyGeek on July 20, 2009 at 1:28 PM
looks like TOTUS couldnt get the schmucks to appear behind him on camera as he says they promised to save money..maybe they bought a frakkin CLUE after the american hospital assoc got screwed that way and had to come out and say we didnt promise that, which was of course reported in tiny tiny print later…..
ginaswo on July 20, 2009 at 1:29 PM
depends, did it or did it not shore up the banks and kept them from all going under at same time. By extension thwarting widespread Martial Law from emerging as the chaos which would come with that got underway?
jp on July 20, 2009 at 1:29 PM
And the world wonders “Where is Sheriff Joe?”
GarandFan on July 20, 2009 at 1:29 PM
Psychological instability. Thou shalt not question the One.
Steve Z on July 20, 2009 at 1:29 PM
And now the community organizer who spent five hours in the Senate is demanding that he get his national healthcare because he, um, he, ahhh, he really wants it. So give it to him. Because he really wants it.
Lourdes on July 20, 2009 at 1:30 PM
Fool me once ……… you know the rest.
fogw on July 20, 2009 at 1:31 PM
We MUST pass this bill before Friday! There is NO TIME to read it.
Herb on July 20, 2009 at 1:34 PM
Saw it coming from the get-go.
It’s just shocking that a bank would be in it for the profits, huh.
It’s just horrifying that banks no longer want to lend to people that can’t or won’t pay it back. Amazing.
It’s truly mystifying that the government, knowing banks were in trouble for bad lending (that they forced in most cases), sent the banks money and the banks stopped the bad lending policy and turned to making a profit again.
What was this cretin-in-chief thinking, they’d become altruistic? Puhleeze. If I were an investor in a bank (which I am) I’d want them to do whatever it takes to return to profitability so MY money can grow. WHY would I want them to follow a policy by screwBama that dictated they fail and become part of the very unprofitable government business?
THIS is one example why liberals (and democraps in general) should always be on the outside looking in, never in the seat of power as a majority power. They have NO sense whatsoever, and NO idea what capitalism is, the good it can be, what the free market is for, or what freedom in general is at all.
Now, lets get rid of them for once and all.
Spiritk9 on July 20, 2009 at 1:35 PM
This is what happens when you put a guy who finds TurboTax too complicated in charge of accounting. It’s BS to say that it is impossible to track. This TARP money was given out in trust from the American People and Geithner and his people need to be held accountable for breaking that trust.
highhopes on July 20, 2009 at 1:35 PM
You made me snort my raspberry mocha up my nose.
whitetop on July 20, 2009 at 1:36 PM
To the Butt-pole, Swallow!
bluelightbrigade on July 20, 2009 at 1:37 PM
I no longer believe the TARP money to banks was ever intended to loosen lending. It was intended to save the banking system, and allow one bank to buy another one in case of failure. Almost all of the increase in money supply has gone to bank reserves–none has made it into the economy, there is no multiplier, and the economy is not growing.
My sense is that the financial system was viewed by the gov’t as much more fragile and in danger of collapse than they ever let on. I still don’t have the slightest idea what the real health of the banks are in the US. My guess is that they are in very precarious shape, in spite of recent earnings. Earnings can’t make up for worthless assets and ultra high leverage/CDS and all that crap.
The banks don’t view these TARP reserves as “excess.” They’re scared shitless that they’ll need them to survive. So they’re NOT going to lend more simply because they have these reserves. I think that if we “force” the banks to accept these funds as excess, they’ll have to find a way to cut credit some other way, or in fact, they might fail.
The increase in the money supply may, may have been enough to save the banks, but the economy will have to recover on its own imo.
JiangxiDad on July 20, 2009 at 1:37 PM
Glenn Beck exposes TARP corruption, BHO incest w/ Goldman Sachs:
http://www.youtube.com/watch?v=khGZ3a4zTNU
jgapinoy on July 20, 2009 at 1:38 PM
What did you expect from a TAX CHEAT?
belad on July 20, 2009 at 1:41 PM
To the Butt-pole, Swallow!
bluelightbrigade on July 20, 2009 at 1:41 PM
JiangxiDad on July 20, 2009 at 1:37 PM
That’s correct. TARP was meant initially to give banks relief from their toxic assets that were dragging them down, allowing them to become profitable again so they could make the business loans to keep businesses employing people. They did that, but loosening lending was a wish from the liberals that didn’t happen and should not happen. You can’t improve things by doing what was being done before; letting Frank and Dodd tell you that you MUST loan to these people for homes and ignore the fact that they won’t pay you back.
Now the gov’t is shocked that welfare queens can’t get loans.
Spiritk9 on July 20, 2009 at 1:42 PM
Well, whatever ended up happening with the TARP money, I’m still greatly appreciative of Sen. McCain suspending his presidential campaign to be all hands on with the TARP program.
myrenovations on July 20, 2009 at 1:43 PM
i can’t watch. yall tell me what he says. wait, tell me anything he says that is truthful!
kelley in virginia on July 20, 2009 at 1:46 PM
I agree with you. And we should deep-six the stimulus, and instead give targeted tax breaks, SS holidays, income tax reductions, sales tax holidays and the like. Those kinds of stimuli, imo, along with the TARP $ that went to help stabilize the banking system, might revive the economy. (Oh, and cancel cap n trade, health care, and every other anti-business, pro-income-transfer policy of Obama’s)
JiangxiDad on July 20, 2009 at 1:47 PM
btw, if you have a bank account and are earning little or no interest these days, it may be a good idea to keep more cash hidden at home. There is still a risk of systemic bank failure, regardless of what the gov’t says.
JiangxiDad on July 20, 2009 at 1:51 PM
Just a question or two.
I don’t have the education that either these Senators, Congressman, or Civil Servants that get hired to work for the government at the national level have attained yet
how come I can come up with the questions for these banks.
How much did we give you and what are you going to do with the TARP money?
Jeff from WI on July 20, 2009 at 1:54 PM
I have nothing to report except that Barry’s lip were moving. You know the rest.
Knucklehead on July 20, 2009 at 1:54 PM
CNN is reporting that PA state workers only got 70% of their paychecks last Friday because of the state’s money woes. Makes you wonder why the filthy liar is even contemplating the massive spending of socializing medicine and destroying the economy in the name of the polar bears.
highhopes on July 20, 2009 at 1:54 PM
What made up the other 30%? IOUs?
Doughboy on July 20, 2009 at 1:57 PM
The trolls must all be off someplace organizing a community.
Who shall explain to us how this is all supposed to work when they aren’t available? Perhaps the adults?
Yoop on July 20, 2009 at 1:57 PM
For the obvious reason that the filthy liar’s adminstration knew perfectly well that this wasn’t really meant to loosen credit. You don’t make a paper trail by demanding accountablity when your real intent is to let the banks use the money for an ulterior purpose. A couple of mea culpas later and the money has completely been laundered for the filthy liar’s administration and nobody can tell you where it is going. Besides, you act as if it is your money!
highhopes on July 20, 2009 at 1:58 PM
They’re just going to hold it as reserves, in case things get even worse. Don’t forget, among other things, these banks hold our deposits/savings. FDIC is just a “feel good” thing like SS. It’s just another ponzi scheme. If enough banks fail, FDIC is just an advertising gimmick.So be careful for wishing the banks to lessen their reserves and make more risky loans to people for things they should have saved their money for in the first place.
JiangxiDad on July 20, 2009 at 1:59 PM
Bits of cotton-paper have zero value in the event of a systemic collapse.
Gold/silver is viable currency.
LimeyGeek on July 20, 2009 at 1:59 PM
Well, he did say his name is Barak Obama.
Ok, Ok, maybe he did lie about that, too. Ya got me!
Yoop on July 20, 2009 at 2:01 PM
Near as I could tell (it’s CNN so the coverage is superficial at best) the 30% is “on account” to be paid when the state gets done with its budget process. That of course leads to its own issues because that becomes a liability that will continue to grow.
highhopes on July 20, 2009 at 2:02 PM
Yes, I have NOTHING against that. I just meant that whatever portion you still have in US toilet/fiat currency paper may be better off at home, esp. if ur not earning any interest.
btw limey, did you hear that MS was just found guilty of manipulating the bullion market. I use gld and slv etf’s and am nervous.
Morgan Stanley pays damages for precious metals fraud according to Jeff Neilson at Seeking Alpha.
http://snurl.com/nlcja
JiangxiDad on July 20, 2009 at 2:06 PM
Agreed. If you don’t have a home safe, get one and stock it with some $$. Hope for the best, but prepare for the worst.
4Freedom on July 20, 2009 at 2:08 PM
I looked into it a litte further. The PA workers got paid for days worked in June. They’ll get a payless payday on July 31st if the state doesn’t pass a budget by then. The sticking point is the Democrats and Rendell want to raise personal income taxes while the GOP insists on cutting spending.
highhopes on July 20, 2009 at 2:11 PM
The really, truly, amazing thing about this idiot-in-chief and his lackeys is that there ARE problems that need solving, and to outline the need to solve those problems there is NO need to lie about it! Generating BS numbers is only making this idiot look more like a fascist idiot than ever.
Maybe it’s just me living in a fantasy land here, but I’d think if I wanted to leave a legacy it would be for actually improving the country, not destroying it with idiotic socialist policy and fascist dictates.
Color me so silly.
Spiritk9 on July 20, 2009 at 2:13 PM
Yeah, heard the same as you most likely. If they’re crooks, burn ‘em at the stake.
Not an ETF guy myself. I keep purchasing what I can afford whenever I can afford it and stashing it. In a true SHTF situation, even a modest pile of silver can be a lifesaver.
LimeyGeek on July 20, 2009 at 2:14 PM
me2. And if i never have to use it, I’ll hand it to my kids and that will be that.
JiangxiDad on July 20, 2009 at 2:16 PM
Exactly. It’s always smart to hold physical currency IMNSHO ;)
LimeyGeek on July 20, 2009 at 2:21 PM
Our federal government, and particularly this congress, have now passed well beyond being merely nuttier than squirrel poop, and have entered the realm of batsh*t insane.
Dave R. on July 20, 2009 at 2:27 PM
So let me see if I understand. Congress passed TARP with the understanding it would be used by banks to increase lending (ha, ha). The banks sans a written contract with congress spelling out the particulars of the loan used it for things they wanted and now Congress is surprised.
I have 9 words for the congress critters.
“The road to hell is paved with good intentions”
The carbon pollution known as congress and the executive should be sequestered asap.
chemman on July 20, 2009 at 2:41 PM
Most desperate post by a liberal evah!
The TARP was specifically to increase lending, not for cruises and lunch…the reserve requirements were set aside.
But just to put a knife in your foolish, naive, and ignorant post.
They were specifically given the task to move loans and assets from the “non-performance” category to “performance” category…that goal was specifically spelled out and is still in effect.
They are trying to move these loans into performance categories, not by loaning money (which they should have), but by loaning assets (which is short term, but long term problem, again)….that is just extending credit, taking much less down, delaying sale, all to just “technically” move them into a performance loan.
Way beyond what you would understand…but others get it.
Obama, and his administration took on something they cannot handle, understand, or police…it is chaos in the banking world.
right2bright on July 20, 2009 at 2:42 PM
Yep, IMO the whole thing started when the Fed Res Bank did NOT do their jobs, and allowed all the banks to overleverage their reserves.
This was not a regulatory problem, but one of POLICY within the Fed.
So, when the Toxic assets hit the system, and people started to panic, the banks did not have the reserves they needed and started to fail.
The Treasury and Fed then GAVE them money, to try to shore up their Reserves, but that money was not enough, because the Fed had really TIGHTENED the Reserve requirements… thus banks still were not able to lend.
Politicians were saying one thing to the public, but the Regulators were following Fed Res Bank Policy, and not allowing them to loan money out.
Problem is, the in the mean time, the banks are surviving but those toxic assets are still out there… and with the economy in the crapper due to a lack of confidence in the system (thanks Bambi) and a lack of Capital being loaned… those toxic assets are having a HUGE impace on the economy.
They are playing us like suckers… Bankers getting rich, while the economy burns… and all these decisions are made by????? Can you say… Bankers?
Romeo13 on July 20, 2009 at 3:00 PM
I have wondered many times if a rescued banking system gtee’s a rescued economy. My fear is that a healthy economy requires a sound banking system, but that the cost of making the banking system sound again will exhaust the economy.
Without targeted tax cuts, SS holidays, and other measures like that to put money directly into people’s hands, I don’t know if economy can recover. I mean, where is the economicstimulus supposed to come from for that? Surely not that economically catastrophic Stimulus bill that passed. That only makes things WORSE.
JiangxiDad on July 20, 2009 at 3:07 PM
The first thing Bank of America (rotten bastards) did was suspend all various lines of credit for their customers regardless of credit rating or payment history. The second thing they did was raise interest rates on BofA credit cards and cut credit limits by 25% to 50%. Being a 12 year BofA customer with excellent credit and zero late payments, I was told to go pound sand. I started canceling my accounts and moving my funds to other banks…to which, I recieved numerous phone calls by BofA asking why. I’m sure my recorded phone calls with BofA representatives on my reasons for switching banks are entertaining to listen to. At least I haven’t been arrested…yet.
Wyznowski on July 20, 2009 at 3:12 PM
I’m not sure that the banking bailout was ever needed to make the banking system “sound” again. Bankruptcy and letting already sound banks purchase good assets from the failing banks might have been the best course. Given how things are now, one could hardly argue that the results would have been much worse. And, as of now, I don’t think anything is as sound as we are made to believe…recent earning not withstanding.
genso on July 20, 2009 at 3:25 PM
I consider the ‘stimulus’ to be like using a bypass machine to deal with a stopped heart. Sure, it can pump some money around, but without the correct incentives to restart the heart, the economy is just a hopelessly dependent vegetable on life support.
Of course, the stimulus was/is illegal (but apparently the Constitution is far too anachronistic to be taken seriously anymore), and the kind of stimulating effect that “oh shit nobody is going to bail out our asses” would have had will likely never be realized.
LimeyGeek on July 20, 2009 at 3:29 PM
The loans allowed many of the banks to to write down the bad assets that kicked off the crisis. Those assets were unregulated securities… if the regulatory system were being violated we would be seeing banks on trial now. No laws were broken, however.
The bottom line is that the injection of capital has worked to keep the system from imploding. To that extent it worked to avoid a full scale meltdown of our finance infrastructure and provide banks and institutions enough time to work through most of the initial bad debt and survive the shock.
TARP evolved with the crisis.
Oh really????? Give me a break. The banks could look at any part of their activities and announce that that is where the funds went. There is no special accounting method for this Ed. The funds weren’t segregated… it wouldn’t have been effective to do that.
Our financial system is fast, fluid, and complex, and vulnerable to shock. Most people don’t understand how fast and complex the system is. When Barings went under it threatened to wipe out at least three of the big names on Wall Street instantly. The Fed and the banks worked together with the international clearing houses to restructure the system (reorganize the trade settlements) so the following Monday only one bank failed. TARP has allowed banks time to adjust and survive and preserve the system which underpins our free market economy.
lexhamfox on July 20, 2009 at 3:33 PM
What an utter pile of crap. Adding another TARP account table to an accounting database is trivial. Moving money around from that point on is as ‘effective’ as any other electronic transaction.
The gubmint fscked it up. Maybe on purpose? Maybe they didn’t want people to be able to track where every dime went….that would have given us data to measure the effectiveness of the program – heaven forbid gubmint should be accountable!
The money was allowed to be sloshed in with other funds effectively laundering it. Typical abject incompetence from our DC monkeys.
LimeyGeek on July 20, 2009 at 3:51 PM
LimeyGeek on July 20, 2009 at 3:51 PM
Actually you made my point. You can book any entry you like to show the funds being used for this that or the other. Just decide what you would like to show…
lexhamfox on July 20, 2009 at 3:59 PM
Not on any banking system I’ve worked with. There is a absolute electronic trail specifically recorded to audit transaction flow. How do you think these systems enable the gubmint to audit terrorist funds? Put a million dollars of your own money in there and see how closely it’s tracked.
The fact that it wasn’t tracked signals incompetence and malfeasance. Color me unsurprised.
LimeyGeek on July 20, 2009 at 4:08 PM
I wish that citizens had “standing” to sue the gov’t in court. The Constitution has become so anachronistic as you say that the 3rd branch may be closed down before it has an opportunity to save us. Any chance our Clarke Kent John Roberts has a phone booth handy?
JiangxiDad on July 20, 2009 at 4:08 PM
Nope. I said let them fail then and I say let them fail now. If a bank would have failed without the TARP funds than so be it. Other banks would have been positioned to grab more market share & revenue (I know…the horror of it all). Those well postioned bank would have been also able to snap up the talented people laid off creating an even better company which would….wait for it……..caused more $$$$ to be earned!
VikingGoneWild on July 20, 2009 at 4:19 PM
This was something I mentioned a while back. I don’t if we do or don’t. It seems to me that any unconstitutional legislation injures our constitutionally-protected fabric, of which we are all stakeholders – hence we are all injured by such illegal action. As injured parties, we should have ‘standing’ to sue.
LimeyGeek on July 20, 2009 at 4:20 PM
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