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Old 01-04-2010, 05:34 PM
 
23 posts, read 20,095 times
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On December 15, 2009, Citigroup and Wells Fargo won approval to begin repaying $45 billion in aid that they received from the Federal Government. Many view this as a sign that the financial sector in the United States is rebounding, and that the $700 billion Troubled Asset Relief Program (TARP) has been a success.

TARP began as a program designed to purchase toxic assets from troubled banks but quickly morphed into a means of bolstering bank capital levels. While it is up for debate if that mission has been a success, it ignores a very important underlying question. What has happened to the “toxic assets” on bank balance sheets that TARP was originally intended to address?

The Congressional Oversight Panel (http://cop.senate.gov/index.cfm - broken link) in charge of overseeing TARP stated in its August 2009 report (http://cop.senate.gov/reports/library/report-081109-cop.cfm - broken link) that it “is likely that an overwhelming portion of the troubled assets from last October remain on bank balance sheets today.”

Additionally, a December 2009 report (http://cop.senate.gov/reports/library/report-120909-cop.cfm - broken link) by the same panel argues, “While strong government action helped prevent a worse crisis, it may have done so at a significant long run cost to the performance of our market economy. Implicit government guarantees pose the most difficult long-term problem to emerge from the crisis.”

The panel warns, “If the troubled assets held by banks prove to be worth less than their balance sheets currently indicate, the banks may be required to raise more capital.”

Basically, the government has spent billions of dollars for purposes other than which it was intended, has not addressed the underlying problem of the financial meltdown, and potentially caused long-term economic damage.

Should banks require more capitol in the future, demand that they do not get it from the government.

To see more, visit the Pelican Institute for Public Policy (http://www.pelicaninstitute.org/home/ - broken link).
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Old 01-04-2010, 06:24 PM
 
Location: Great State of Texas
86,068 posts, read 79,064,695 times
Reputation: 27669
Actually the banks were able to hand that crap paper over to the Fed as "good" collateral for more Fed money.

Why do you think Bernake is so against this "audit the Fed".

Look for the programs that loan to banks for their "hard to sell assets", "hard to sell securities" which are AKA toxic debt.

Follow the money: Bailout tracker - CNNMoney.com
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Old 01-04-2010, 11:01 PM
 
38,546 posts, read 20,788,151 times
Reputation: 18067
The banks got the money to make money investing in the markets. The bad loans are still on their books. They repaid back TARP money - in my opinion to get out from underneath gov't regulations to pay off year end bonuses. The Dow Jones rose not through the normal process, but through the bank investments. Citigroup got to be exempt from paying taxes on the money they made from the stocks.
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