Regnat Populus

The people rule.

Geithner Refusing TARP Repayments?

Posted by Max Barron on April 21, 2009



Today the Wall Street Journal reports that the Treasury Secretary wants bailed out banks to meet certain unspecified criterion before they can repay the TARP money loaned by the American Taxpayer. 

Treasury Secretary Timothy Geithner indicated that the health of individual banks won’t be the sole criterion for whether financial firms will be allowed to repay bailout funds, a position that might complicate their efforts to give back the cash.

Mr. Geithner wants to “consider the overall health” of the financial system before allowing the tax payers to be repaid in full.  There are a whole host of reasons for this, and in my estimation, the overall health of the financial system is the least of them.  Those reasons likely include profits from dividends and control of the banks.  The latter of the two is probably the chief reason.  However, Timmy has a bit of a different spin on it.

“We want to make sure that the financial system is not just stable, but also not inducing a deeper contraction in economic activity. We want to have enough capital that it’s going to be able to support a recovery,” Mr. Geithner said.

Hogwash!  This is soft-speak for “we want complete control of the economy.”  Essentially, he wants to keep the banks on the hook so that he can continue to pull their strings for whatever political machinations the Left desires.  Not to mention the added bonus of profits (to the tune of $2.5 billion thus far) on the dividends for TARP monies.  Which, I can assure you, will never be returned to the tax payers.  Instead it will line the federal coffers and later be doled out by Congress to their favorite pet projects.

Obama administration officials worry that the repayment of bailout money, combined with a general disinclination toward partnering with the U.S., could undermine their efforts to restore health to the financial sector and the broader economy.

Worried that repayment will undermine partnering?  Doesn’t that seem a bit antithetical?  Foreign and domestic investors are probably far more likely to invest in institutions that are free from federal puppet strings than those that are still firmly attached.  Repayment of the debt shows investors that the institution is making every effort to return to full profitability.  It also shows that it is making enough of a profit to maintain operations AND repay tax dollars.  This would encourage more investment from private sources and help return the financial system to stability.  Keeping the banks tied to the federal government only diminishes the confidence that investors have in these institutions.  Especially with Congress holding populist witch hunts and interfering with board decisions.  Private investors see those actions and steer clear of government strings. 

Then again it might make perfect sense.  If, of course,  you are looking to push out private investment to ensure continued government control of the banking system both here and abroad.  

“We want to be out of the financial system. We want people to be paying back the government. But we don’t want people to be paying back the government in ways that will put themselves right back in trouble and leaving themselves with inadequate capital,” Lawrence Summers, chairman of the president’s National Economic Council, said Sunday on NBC’s “Meet the Press.”

Double speak.  Pure, unadulterated double speak.  Saying in one breath that you want out of the financial system but don’t want borrowers paying you back in the next… double speak.  What Mr. Summers meant to say was “We want to continue to receive dividends from the banks, but we do not want to relinquish our control over the finance industry.”  At least that statement would be accurate.  Because as long as the banks have yet to repay every red cent of the TARP money, the gluttonous Fedzilla  has reason to keep the shares and warrants of said banks.  The longer they can keep the banks dancing to the federal tune, the better.  At least as far as the White House and Congress are concerned.  Even if that means prolonging the pain of this recession and credit crunch.

I hate to say it… but we told you so.


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