Here is a new NYT symposium, including a contribution by yours truly, opening like this:
The sooner banks can get out of TARP the better. People have differing opinions on which of the bailouts were good ideas and which not, but we can all agree that the entire episode has been a national nightmare. We should not turn down a chance to put parts of that nightmare behind us.
Matt Yglesias had a good blog post on this same topic.
what’s the argument against letting banks repay TARP?
When Barney Frank started to tell the banks how they should market themselves (Remember the Northern Trust Open incident in February?), it became clear to me and every bank management that getting out of TARP ASAP was imperative for any bank that wanted to build a viable business model.
Given that JP Morgan was actually coerced into taking the money, it is good to see a dark period in our country’s history start to come to an end.
Does anyone really believe that the repayment of TARP funds will put an end to the administration’s interference in the operations (i.e. financing, risk management, compenstion, lending terms, etc.) of US financial institutions?
farmer, possibly, but Geithner gave them MY water, to keep alive banks I didn’t want to live. And now he’s making restrictions I don’t want on the banks that didn’t want my water.
Now, you might say, “you are just some individual, probably a libertarian, you don’t get to decide what the government does” and I will say “you’ve got it!”
Iglesias: At the end of the day, the valuable thing that systematically significant institutions got from TARP was not so much the TARP money as investors and creditors’ knowledge that money would be provided in the future if necessary to prevent bank failures. That’s something the banks can’t “give back† nor can the government “take it away.†
…nor can the government “take it away.†
Oh hell yes they can. They can institute a framework agreement for systemically risky firms when they come back for money in the future that will address the systemic risk, the actual issue, not leftist pet projects like compensation caps. Sheila Bair sort of did this, informally and unilaterally. They could work to formalize this framework methodically, and visibly, making it a known, rather than, say, dicking around with healthcare.
Farmer: Your analogy works for some banks but not for Goldman. Goldman never requested or needed any money. Instead, Paulson called them in and told them “you will take this so the other banks don’t look bad in comparison”.
Well, they had better let it be repaid, otherwise there will not be money for UAW next year, at least, no money without a bill making it out of Congress.
Nope, not credible. Not any more credible than the insistence that, no, we definitely would not bail out Fannie and Freddie. Plenty in government insisted that, and then decided that, no, we couldn’t let it fail.
The only way it’s credible is to actually let something “too big to fail” fail, and then not panic about it.
The sooner the banks can get back to rewarding people for making a lot of money on bad debt, the better, for making AAA bonds out of junk bonds is true financial innovation, and the geniuses that managed that need to be richly rewarded so they can innovate again.
close
open and close?
It is imperative for the banks to repay TARP so that they can they proceed as before to bankrupt themselves. Cries for bail-outs will then be met with a very well deserved “fool me once, shame on you; fool me twice, shame on me.” I give’em 2 years to be back begging again–after the resets on Option
Arm, etc.
The banks are not paying back TARP. The TARP money is being paid back using taxpayer money. Some of it via TARP, some by all the other billions routed to the banks.
Goldman Sachs got billions of tax dollars via money laundered through AIG, all they are doing is turning around and sending some of that money back to the Treasury. And this is just one way, there are billions more via low interest loans, guarantees and the buying of the banks toxic “assets” at premium prices by the FED and Treasury
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