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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » Do you believe that banks that paid back the TARP should be free to do whatever they wish?

Do you believe that banks that paid back the TARP should be free to do whatever they wish?

Some people believe that just because a bank has paid back the TARP money, they must be doing something right. However, the TARP money was made available to recapitalize the banks until the banks could find another source for the money.

Where did many of the banks find another source of money? Well about $100 was raised through the capital markets but the majority was gotten from the government. Currently there is about $800 billion outstanding from the federal reserve discount window (up from about $100 billion before the financial crisis) and $320 billion available in FDIC loan guarantees.

Since the largest four banks control about 50% of the market, it is assumed that they got about 50% of that money. If that is the case, each of those 4 banks would have about $110 billion in government loans or loan guarantees outstanding. FDIC loan guarantees can be tracked but discount window loans are kept secret by the federal reserve.

As an example, it is known that Bank of America has $44 billion in FDIC loan guarantees outstanding and an unknown amount of discount window money.

If the government lets those banks run wild, the taxpayer will get hit again either by bailing out the banks or the banks will go into insolvency (the government will then need to recapitalize the banks due to FDIC insurance).

Only the Federal Reserve knows the real health of those banks but it can be assumed that at least Citigroup and Bank of America are not very healthy since they can’t seem to make money in a zero interest rate environment.


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7 Responses to "Do you believe that banks that paid back the TARP should be free to do whatever they wish?"

  1. Quan says:

    Regulation is necessary.

  2. Uncle Pennybags says:
    No, I wouldn’t say that they should be free to do whatever they wish.

    Something went wrong with the financial system, and it required a massive gov’t bailout. The financial system needs to be corrected so that isn’t required again.

    I’m no expert, but among some ideas I’ve heard and liked is that:
    1. No bank may control more than 1% of deposits in this country.
    2. That if they reach a certain “too big to fail” size, they must keep a higher level of reserves.

    I’m sure there’s other good ideas out there.

    This shouldn’t be about getting even, it should be fixing the broken system so it doesn’t happen again.

  3. c c says:
    No I don’t. To take TARP you were taking risk you shouldn’t have and need special attention, that includes auto makers paid out of this fund. Any shortfalls in repaying the American taxpayer should be made up with a temporary TARP tax on ONLY the banks that took the money. If you didn’t take the TARP funds nothing should happen to you and no special government watchdogs or taxes.
  4. The Big A -- American Atheist says:
    no — Obama was dumb not to regulate them before the bail outs — I have no idea what he was thinking
  5. Kiran C says:
    No. Everyone should call their local congressman and demand they implement the Volcker rule. If we had we would have prevented the problems with Lehman Brothers.
  6. apeman605 says:
    Actually, the Comptroller of the Currency, not the Federal Reserve examines national banks. The Federal Reserve examines member state charter banks. The FDIC examines non member state banks.
  7. jack says:
    what i am still tring to figure is if the Banks paid back all that money then why does the government not take that money burn it then write it off of our national debt..yea these banks have paid that money back just like there not going to give billions of dollars in bonuses anymore…right…

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