Warren: Banks Returning Money Are Still Part of A Troubled Industry
I can't imagine the thinking behind this. We lend them the money and then let them pay it back - before we've fixed the problems that lead to the crash in the first place? And it won't do much for consumers, since half of them are investment banks.
Elizabeth Warren is skeptical, and wants to hear the terms of repayment. She also warns that the stress tests were not as strong as they should have been. Stay tuned:
... The decision to allow the banks to exit the Troubled Asset Relief Program, or TARP, also ushered in a new, and potentially risky, phase of the banking crisis. Letting the lenders out now — earlier than many had envisioned, and without the industry reforms some consider necessary to prevent future crises — raises many sobering questions for policy makers, bankers and taxpayers.
The program was aimed at purchasing assets and equity from banks to strengthen them and encourage them to expand lending during a tightening credit squeeze. But after banks return the TARP money, the administration will forfeit much of its leverage over them. With that loss goes a rare opportunity to overhaul the industry. The administration’s ability to push institutions to purge themselves quickly of bad assets and do more to help hard-pressed homeowners will be diminished.
Of even deeper concern is the running trouble inside the banking industry. Despite tentative signs of revival, many banks remain fragile. Four of the nation’s five largest lenders, including Citigroup and Bank of America, were not allowed to return their bailout funds.
Some analysts worry that financial institutions that repay bailout money now may turn to Washington again if the economy worsens and losses overwhelm banks. One of the most vexing problems of the credit crisis — how to rid banks of their troubled mortgage investments — remains unresolved.
Which, of course, is why so many experts were urging the administration to nationalize the banks. Those bad mortgages have to be dealt with sooner or later, and the bailout program simply postponed the day of reckoning.
The banks are eager to escape TARP and the restrictions that come with it, particularly the limits on how much they can pay their 25 most highly compensated workers. (Even so, the Obama administration plans to propose guidelines on executive compensation for the broader industry as early as Wednesday.)
Yet even banks that return taxpayers’ money will remain dependent on other forms of government aid. Among them are enhanced deposit insurance, incentive payments to modify home mortgages and federal guarantees on bonds that banks sell to raise capital.
“They may need the government’s money to get through this storm,” Christopher Whalen, a managing partner at Institutional Risk Analytics, said of the banks. “If the banks have to come back and ask for more money in a few months, I don’t think the response from Washington will be too kind.”
Please don't tell me they want out so the CEOs and execs won't have a salary cap. Please.
here's an answer:
if the banks get out from under the tarp money restrictions
and return to their old ways, then the FDIC should
stop insuring their depositors and then these depositors
will/can move to a bank that will allow govt regulation
and funds protection. it's a boycott of supreme momentum.
That's one reason.
Look I can understand why they have gone this way, they believe that one if not the main reason the Great Depression was so bad was the allowing of banks to fail. And if you look at this situation allowing Lehman Bros to fail was the tipping point last year.
I want to see the complete nationalization of the industry and the banning of ALL upper management for life. BUT!
Once again the rethugs are working against the best interest of the people. All this "socialist" talk has poisoned the well. They have working to close off the road to true reform by getting their base of idiots to use that as a mantra.
These fools don't want the thing that is in their best interest to happen. AGAIN!
IMHO.
We get screwed again!!!
Who is this stupid and ignorant Warren twit getting money under the table from?? Perhaps the party of Right Wing-NutO liars.
She is very intelligent and not a right winger. Watch the Daily Show video of her with John Stewart.
...the reason they want to return the money so soon is because they are declaring that they have no intention of cleaning up their acts. They are stating their intention to continue their role as one of our society's principal predatory parasites.
We need to nationalize all banks and dissolve the Fed.
there is no government by the people anymore. It's one big crony capitalist game with actors playing the role of Senator, Congressman, CEO...
Vote GOP and move forward to the 18th Century.
are Predatory Parasites feeding off of the rest of us; thus, Repugants are predatory parasites.
Don't feed the parasites. Don't trust them. Don't watch Santelli and the yahoos. Let's do our homework. Only invest in what you understand and if it makes sense to you. If it's too complicated, the corp. is hiding something. It's that simple.
If the crooks say it's too sophisticated for you to understand, say "you're right, so I'm taking my $$$ elsewhere." you might make less money, but it will be safer.
There is no such thing as guaranteed returns. It's a fairy tale.
On the upside, pretty clearly puts top management at risk of civil and criminal action when/if any of these banks come back in short order for another bailout. If they exceed the TARP-imposed compensation rules and then find themselves in need of additional cash the shareholder suits for violation of fiduciary duty pretty much write themselves. And if investigation turns up evidence that they knew the shareholders would take a bath when they decided to enrich themselves, so do the criminal complaints.
So what they'll probably do is buy themselves some legislation exempting them from all civil or criminal accountability, just like the telecom industry did when they got caught violating eveybody's privacy.
Always good to know that there are elected officials who can be purchased for a song.
Many if not all of these same banks received 100% on their poor bets that AIG promised to cover if they went bad. The banks' bets went bad and AIG could not cover the hundreds of billions (perhaps even trillions) of hits that should have littered the balance sheets of these banks, but good mother government gave hundreds of billions to AIG so AIG could immediately thereafter funnel the same money to the banks and indirectly to their wealthy clients world wide to pay off the bad bets.
Hell, Geithner even testified that the Thursday in Setpmeber of last year when Treasury and the Fed took the extraordinary step of extending to AIG an emergency loan of $80,000,000,000 the money was withing minutes of being authorized wired to Goldman to cover the counterparty risk on credit default swaps sold by AIG to Goldman.
AIG is a rotting shell that should have been allowed to collapse last year. Rather, it remains with flies swarming and is nothing more than a vile conduit for the pilfering of billions if not trillions of US taxpayer dollars (plus the interest paid each year by taxpayers) to bail out banks and their wealthy clients world wide. We would be better if Wall Street were completely destroyed by a tidal wave. The same could be said for DC in many respects.
these banks aren't 'still part of a troubled industry', they are still part of an even more troubled industry.
we have been snookered and screwed, and things might appear to be getting better (or, i should say, we keep hearing from the msm about the end, or a recovery, etc.), but i fear that we have only seen the beginning of the troubles, unless REAL change is enacted.
haven't joined the former middle classers yet who still think there's actually "$omething holding them up".
we'll hook up and we can camp out and rough it. Write it all off as a bad dream.
it all.
my takeaway from this is
1. politicians can once again take money from TARP related donors. Phew! /s
2. I agree with commenter above who said the banks have NO intention of cleaning up their act. Repayment is saying Thanks but no thanks to accountability.
3. Support your local banks and credit unions, people. They do business responsibly.
4. We the public have learned a lesson. Do not do business with these loan sharks.
Read the fine print. Trust your gut. If you don't understand the deal and think you cannot afford it, you can't. Swallow hard and remind yourself of the pain you just saved yourself when you are older and less able to pay that money back.
As soon as they make some large campaign contributions and dole out mid-year bonuses.
Yah think anything is going to change? Same thing is going to happen to healthcare. Yah think the military industrialist complex is going away contritely? It says right in the constitution "Him what pays, says" Doncha know.
Comments are closed on this entry