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J.P. Morgan Chase (JPM), Goldman Sachs (GS) and American Express (AXP) are three of the big banks that are expected to get the okay. While all three banks made application for permission to repay TARP last month, some wonder if this is more for show than an indication banks are ready to stand on their own. Banks can still tap cheap loans, debt guarantees and, of course, the biggest promise of all -- that big banks are too big to fail. So it's more like sending these banks out with training wheels than allowing them to fend for themselves.
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While the banks are showing signs of recovery only thanks to the trillions of dollars the government and the Federal Reserve put into the system, not because they can stand on their own, the system is still fragile: Foreclosures continue to mount; bankruptcies are being filed at the rate of more than 6,000 per day.
"Overall I don't think it (banks repaying bailout funds) is a real plus for the market or for the economy," said Marc Pado, U.S. market strategist at Cantor Fitzgerald in San Francisco. "They are choosing to repay TARP rather than rebuild their business. In terms of the economic recovery it's an obstacle.")
These are still corporations, and they are still stuck on "Stockholders Uber Alles" regardless of the fact that they continue to exist and have a chance to make money at all only through the good graces of the government.
An interesting aspect of bank desires to pay back government funds is disposition of the various warrants (essentially, stock options) that were a part of many of these deals. A few smallish banks have been able to reacquire warrants from the government at rather attractive prices, so it seems quite possible that yet another right-wing Catch-22 might be brewing here.
If the government insists upon getting fair value in surrendering warrants, they are obviously socialist pigs trying to harm the best of the recovering banking industry while it is still at its most vulnerable, and if they let warrants go at bargain prices, they are obviously incompetents who are once again selling out the taxpayer to line the pockets of the very people who caused this mess to begin with.
When you are a right-winger -- and hence have no actual arguments to make -- you just love to see things like this come along, where there is at least some sort of daffy argument you can turn to no matter what form actual policy might take...
Banks want to be rid of the oversight, and if this means leaving TARP, then that's what they'll do.
Whether or not they are strong enough to stand on their own isn't so much an issue. They will fail anyway at some point, and prefer to fail only after the CEO's and primary officers of the company get their oversized departure pay and other corporate payouts.
In some ways, it might be best if these big banks do fail. Maybe on the next go around, we'll get some banking institutions that'll play nice and not try to rob us of our wealth.
Banks want to be rid of the oversight, and if this means leaving TARP, then that's what they'll do.
Repaying TARP does not get rid of oversight, all banks have oversight, it gets rid of "control" demands.
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