Monday, June 20, 2011

Banks to Borrow Money from Government to Repay the Government

Those Clever Devils

In 2008 the Bush Administration, remember them, created the Troubled Asset Relief Program, or TARP to provide capital to failing banks to enable them to survive the financial crisis.  This money was to be paid back, and in large part it is being paid back.  Of course, in the world of banking, paying back the government does not always mean paying back the government.

The Boston Globe reports that small banks have found a unique way to pay back the government, borrow from the government.  The Obama Administration set up a Small Business Lending Fund to

Main Street
banks and small businesses to work together to help create jobs and promote economic growth,’’ said Colleen Murray, a Treasury Department spokeswoman

Instead of creating jobs and promoting economic growth, banks are borrowing from the Small Business Lending Fund to repay TARP money.  Why, well here’s a possible answer.

The new program would let many TARP recipients sharply reduce dividend payments to the government, while no longer facing strict restrictions on executive compensation.

And what about the regulators, you know, the people designated to keep these things from happening.

Banks are not allowed to participate in both TARP and the small business fund at the same time, but the government told banks they could roll their TARP debt into the new program.

In some cases, banks could even qualify for more money than under TARP.

So to those Conservatives who want to stop bank regulation, the banks have a very strong message.

 “For Gosh Sakes People, Leave it alone, we’re doing fine with this regulation stuff”.

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