Some Banks Want to Pay Back TARP Now
One of the big the big controversies right now is the concern that TARP may prompt big losses for taxpayers. The government has not got what it put in. However, an interesting new development is on the way. Some financial institutions want to pay back TARP now, rather than later, or waiting for the government to cash in their assets. In light of solid earnings for Quarter 1, many banks feel that they have adequate capital to pay back their obligations — and shed some of the more onerous requirements imposed on those who have TARP funds.
Fortune, via CNN Money, has this argument as to why banks should be allowed to pay back TARP funds as soon as they can:
Meanwhile, getting some capital back would help replenish the Treasury’s bailout coffers, which will probably be called on again soon to prop up weaker banks and automakers, among others.
Finally, the government shouldn’t worry too much that allowing banks to pay back TARP will allow them to wriggle free of regulators’ embrace. Yes, it may release them from executive compensation limits.
But aside from their everyday regulation - tighter than before in the case of Goldman and Morgan Stanley because of their new bank holding company status - banks have issued massive amounts of government-guaranteed short-term debt, and benefit from a range of new emergency lending facilities.
Those are levers regulators - and Congress, if it chooses - can use to influence their behavior. And it’s likely that any new oversight regime will be much more intrusive. Even if they repay TARP capital, banks will be under regulators’ thumbs for some time to come.
It’s an argument that makes sense on another level as well. Taxpayers are furious that big banks have been getting bailout money. If they see that the financial institutions are paying back that money, they will be mollified to a certain degree.
April 27th, 2009 at 12:41 pm
[…] of the money Goldman has managed to earn from all of this is meant to repay TARP. Indeed, many former investment banks are eager to repay their obligations to the U.S. government so that they can move on, enjoying less regulation. Any company that wants […]
May 11th, 2009 at 2:23 pm
[…] Some Banks Want to Pay Back TARP Now One of the big the big controversies right now is the concern that TARP may prompt big losses for taxpayers. The government has not got what it put in. However, an interesting new development is on the way. Some financial institutions want to pay back TARP now, rather than later, or waiting for the government […] […]
May 11th, 2009 at 2:45 pm
[…] financial news this morning is that some of the banks want to pay back TARP. There have been some murmurs from banks about getting approval to pay back TARP money, but solid plans and positioning have been on hold as bank stress test results were analyzed. Now, […]
May 11th, 2009 at 3:02 pm
[…] banks are seeking permission from the government to repay TARP so that they can be out from under the closer regulatory oversight of the government. With results […]
May 12th, 2009 at 7:43 pm
[…] still has to approve the repayment of funds, but many think it is a good idea for banks to repay TARP as soon as possible. It would free up additional funds for economic stimulus, and possibly encourage other banks to […]