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Apr 01

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TARP Banks Pay Back Taxpayers with Taxpayers’ Money

When it comes to politics, the truth is hard to come by.  More times than not, it takes an independent (aka bipartisan) group to unveil the reality that underlies the political rhetoric.  Once again, the focus is the Troubled Asset Relief Program (“TARP”).  A recent article found here summarizes the findings of a report to Congress from Special Inspector General of the Troubled Asset Relief Program (SIGTARP).  This article highlights results that conflict with the White House’s contention that TARP was both profitable and complete.  This is consistent with the findings of another new report issued by the GAO (Government Accountability Office).

Among other things, the GAO reports the following:

  1. Almost 50% of the banks that repaid the TARP did so with funds they received from other federal programs.  Effectively, the taxpayers that bailed out the “troubled” banks have been repaid with their own taxpayer money, just from a different government funded effort.
  2. Even though banks continue to exit TARP, the number of banks that are reneging or missing their required dividend and interest payments back to the Treasury program has increased.
  3. The number of institutions in TARP’s Capital  Asset Purchase Program (CPP) (i.e.,  where the  Treasury invests in bank securities) “designated as problem banks — that is, demonstrating financial, operational, or managerial weaknesses that threatened their continued financial viability — also rose from 47 in December 2009 to 130 in December 2011… Institutions that continue to miss payments and problem institutions may have difficulty ever fully repaying their CPP investments.”
  4. “…the remaining CPP institutions were financially weaker than institutions that had exited the program and institutions that did not receive CPP capital. In particular, the remaining CPP institutions tended to be less profitable and hold riskier assets than other institutions of similar asset size. Among other things, they had significantly lower returns on average assets and higher percentages of noncurrent loans than former CPP and non-CPP institutions. They also held less regulatory capital and reserves for covering losses.”

The article found here provides additional insights on this GAO report of the continuing TARP.

About the author

Nicole Liska

I am a Principal at Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I hold an ABD and MA in economics from the University of California, San Diego. I perform damages analyses and serve as a damages expert witness. My resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2012/04/tarp-banks-pay-back-taxpayers-with-taxpayers-money/

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