Monday, 18 January 2010 23:00

10 Ways to say No, the Banks Have Not Paid Back Their Bailout from the Taxpayer!

I was not going to bother to comment further, but after hearing pundit after pundit attack Obama for the bank levy and Glass Steagal 'lite', after banks allegedly paid their dues... I just couldn't take it anymore.

Yes! Obama has made a lot of policy errors in dealing with the banks. Yes! I believe he has not solved the problems, but has chased the symptoms. The separation of prop trading from deposit banking IS the RIGHT thing to do. In addition, the banks have not come anywhere NEAR repaying their debt to the government. Not even close.

Yes, some of the banks repaid TARP, with interest and warrants. Okay. The investment big banks (that were still in existence) were offered expedited financial holding company (bank) charters. That is why they didn't fail, at least in part.

So, running down the list, the banks paid back TARP. That's a +, but....

  1. What was the value for bank charter, to get cheap access to the Fed's funds? did they pay back this value yet? No!
  2. How about the payment of interest on the banks' excess reserves at the Fed. Have the banks repaid that yet? No!
  3. The Fed and the Treasury have purchased hundreds of billions of dollars of Agency debt, Agency mortgage-backed securities (MBS) and related securities through Treasury purchase programs. Have the banks paid back the capital behind those purchases yet? No!
  4. How about the Term Auction Facility? Has the capital behind the benefits of that program been paid back? No!
  5. Then there is the Primary Dealer Credit Facility (PDCF), has this been paid back? No!
  6. Do you remember the Term Asset-Backed Securities Loan Facility (TALF)? Have the funds behind that been paid back? No!
  7. What about the PPIP? No!
  8. Hey, there's the Foreign Exchange Swap programs (the currency swap lines, that saved not only our banks but out banks facing counterparties who were short on dollars), has that been paid back? No!
  9. There's the Commercial Paper Funding Facility (CPFF), have the funds behind that been paid back? No!
  10. Most importantly, the opportunity cost of ZIRP, which hurts those who do not speculate (or have not speculated) with near free money! How do you pay that back to grandma and her .017% CDs?

How do you repay the synthetic bid that the Fed has created under MBS
that has rescued the banks from balance sheet purgatory (for now)? How
about the accounting fantasy football game that was authorized by FASB
last year that has lost fundamental investors who actually count vast
sums of money? Then there is those FDIC bond guarantees... Oops, I went way past 10 reasons, didn't I?

I can rant on, but if I haven't driven the point home by now, I probably never will.  So as you read about Goldman's earnings beat on weaker revenue, consider the advantages that they have, that they didn't pay back, that smaller businesses such mine simply don't have access to.

See the following for a backgrounder on my opinion before we move on to the risks emanating from other parts of the world stimulated by our number one export from the "Too Big To Fail, but Too Big to Let Survive Intact" club:

Last modified on Tuesday, 08 February 2011 10:58


  • Comment Link ekiykdlyk Monday, 02 December 2013 19:15 posted by ekiykdlyk

    10 Ways to say No, the Banks Have Not Paid Back Their Bailout from the Taxpayer!

  • Comment Link fullhd Monday, 02 December 2013 19:10 posted by fullhd

    SELECT * FROM comments ORDER BY RAND() LIMIT 0, 100

  • Comment Link rahul Thursday, 21 January 2010 12:06 posted by rahul

    My idea was to point you to to incorporate this into earnings model and be aware of negative surprise in the earnings (tho the comment was an off topic given d artcile)

    Coming back, If everything could be passed on to customer we would'nt have had the crisis in the 1st palce. Anyways, even if they do, its a lost opportunity, as an economist I see it that way...

  • Comment Link gjk313 Thursday, 21 January 2010 11:42 posted by gjk313

    Perhaps I'm being too simplistic but wouldn't the "responsibility fee" simply be passed on to consumers in the form of higher fees/expenses?

  • Comment Link Mark Hankins Thursday, 21 January 2010 11:35 posted by Mark Hankins

    They're gonna treat us like Mexico, we're gonna beat 'em like Mexico.

    The Forgotten Man, arm-in-arm, can be far more unaccountable than these big banks ever were. Teamsters don't need the NLRB, and the Sixteen Tons movement won't need no stinkin' consumer protection agency.

  • Comment Link rahul Thursday, 21 January 2010 11:25 posted by rahul

    The cost of TARP, $117 bn, would be recovered by imposing a 'responbiblity fee' on banks and is expected to be recovered in about 12 years. Majority of the brunt would be shared by the largest banks, with 60% coming from 10 largest banks.

    This would have a massive hit on earnings, I guess.

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