Say Anything Blog

While it has been reported that Fannie and Freddie will NOT be repaying the taxpayer “loans” that kept them afloat when their respective portfolios of sub-prime paper imploded last year, other firms actually have been repaying the TARP money they were loaned.  And the comparison is not without some telling paradox.

Earlier this week, American Express Company announced that it had re-purchased the last of the government’s stake in the company by paying $340 million for the warrants it had issued to the US Treasury in return for the TARP money it was loaned late last year.  This followed an announcement 12 days earlier that the company had repurchased nearly $4 billion in preferred shares held by Treasury.  Including dividends paid on the preferred shares, the TARP payback provided a 26% annualized return for taxpayers.

A week earlier, investment bank Goldman Sachs redeemed the last of its warrants for $1.1 billion after repaying some $10 billion in TARP funds.  The return to Treasury/taxpayers in the Goldman case was an annualized 23% according to both the bank and the Treasury.

Now, returns of 23% and 26% are pretty damn good under any circumstance.  Particularly when the Fed is holding interest rate low for everyone else.  But apparently some don’t think such returns are high enough.

Lawmakers are pressing the Treasury to extract higher prices from companies that want to buy back warrants and repay the U.S. aid. Legislators have said cash from the earliest buybacks were too low and didn’t compensate taxpayers for risks taken by providing rescue funds for banks when the financial system was teetering near collapse last year.

The argument is that the Federal government was the “lender of last resort” and thus higher returns are warranted.  But three years ago, with market interest rates even higher than today, when private “lenders of last resort” were charging 9% to 12% on fixed rate sub-prime mortgages, and demanding proportionately higher fees as well, the hue and cry from the same liberal lawmakers was that those exorbitant rates and fees constituted “predatory lending.”  So when private individuals and companies seek higher returns in exchange for risky credit loans that’s “predatory.”  But when the government does it… and then some… the higher returns are justified?

And this blatant hypocrisy can’t be blamed on the previous (Republican) administration.  The rules for payback of TARP funds were made far more stringent, and far more expensive, by the incoming Obama/Geithner regime.  Control of Congress, both houses, has been in the hands of Democrats for nearly 3 years.

In essence, this is but one more example of the egomaniacal hypocrisy of those on the Left, setting rules for everyone one else, while exempting themselves and their supporters and their favored special interest groups.

If its “predatory lending” according to the government when a private investor of last resort charges more than 300 basis points over prime and more than 5 points in fees, why is it allowable for the same government to charge more than 2000 basis points over prime?

Hmmm?

(Ironically, the cartoon attached to this post was taken from the ACORN website.  Kinda appropriate, huh?)