I Thought The TARP Program Was For “Troubled Assets”

• February 27, 2009

Browsing over this map showing the 444 banks nationally (as of the time of this posting) that got TARP bailouts from the federal government, I was interested to see two banks listed in my home state of North Dakota. Which sort of debunks what we’ve been told by political leaders here that no North Dakota banks are or were in trouble.
Sort of.
What’s interesting is that the press release of one of the bailed out banks, BNCCORP, claims that they were well-capitalized at the time of taking the bailout. So either we wasted $20 million on a TARP bailout for them, or they’re lying to the public about their financial solvency.
Which is it?
Americans were sold on the idea of the Treasury Department bailing out financial institutions in this country, and partly nationalizing them along the way by taking ownership shares, because the politicians said that we couldn’t let the banks fail. We were told that it would be disastrous for our economy. And yet here we have an instance, if the bank’s press release can be believed, of taxpayer money going to a financial institution that would not have failed at all without it.
This isn’t economic rescue, if you ask me. This is fraud.

Tags: Asshats, Domestic Issues, North Dakota News, Politics

http://Array Bat One

Its interesting, looking at the map, how many of the banks and, the TARP money, are in states that have a history of voting Democrat.

I wonder if that is simply coincidence, or whether persons in traditionally Democrat areas of the country are less responsible, particularly with other people’s money, and more inclined to rely on the taxpayers to to cover for their mistakes in judgment.
ews48

This was just a transfer of wealth to Wall Street who has us convinced that we can not live without them. Other than a small percentage of the mortgages in existence that we know failed and were sensationalized by the media, the only thing that we know for sure is that Wall Street banks are with holding money from the economy. We won’t have a problem if these guys close up. We have a problem because they exist. We will have an even bigger problem when they start dumping all of the money that they are holding on the economy. The vast majority of the banks in the U.S. have operated responsibly and are not in trouble.
http://www.politico.com/news/stories/0209/19418.html
ozahs

So basically we’re propping up the situation where banks make loans they shouldn’t to people who shouldn’t be taking them?
That’s hardly a stimulus.

I mostly agree that TARP was a poorly conceived and poorly executed effort. But it sounds like you are buying into the media spin that capitalism and free enterprise are bad/socialism and nationalization is good. If a bank has lax lending criteria, it will naturally result in losses and instability at that bank. Most banks lend responsibly, but the media never reports that. Banks like BNCCORP, State Bank And Trust, FWB, and WF all are in good financial shape, and providing them with capital so they make more loans is a sound concept because they lend responsibly. But there were probably much more effective ways to stimulate the economy, which is why I never agreed with TARP.

There were lending institutions that relaxed their standards (at the urging of Pelosi, Frank, Reid, et. al.) and got caught up in the easy money and are now in trouble, but they are the exceptions not the rule. They should be allowed to fail or be bought up.

Your comment tells me that you are going hook line and sinker for the media position that all banks are evil. Capitalism and free markets are the answer, not the problem.
Brent

It gets 444 banks dependent on Washington for at least part of their funds. That’s a huge success for many folks of a certain ideology.
http://ndgoon.blogspot.com/ goon

I thought the TARP money was for the same thing.
ozahs

Rob, it is a common miss-perception that TARP funds were intended to bail out banks that are in trouble. That is NOT the sole intention. Instead, the intent is to provide a cash infusion into banking system in order to stimulate lending which then should, in theory, stimulate the economy. The largest of the banks were forced to take the TARP money; they were not given a choice.

When you see the papers and mainstream media criticize banks like Wells Fargo for misusing "bailout" money, you are being duped by the liberal media. They fail to mention that the TARP money was forced on them; Wells Fargo neither wanted nor needed the money. They also fail to mention that there is a repayment schedule, so the banks are not able to give the money back. They also fail to mention that Wells Fargo was the only big bank that increased loan funding in the 4th quarter of 2008, and has already paid a third of a billion dollars in interest to the government.

If you are still under the impression that the TARP funds were intended primarily to bail out struggling banks, then the MSM has done its job of warping coverage to fit their goal of creating distortion and fueling hysteria (thereby gaining viewers and selling papers). Believe NOTHING that you hear from the major networks and the AP.
http://sayanythingblog.com robport

Rob, it is a common miss-perception that TARP funds were intended to bail out banks that are in trouble. That is NOT the sole intention. Instead, the intent is to provide a cash infusion into banking system in order to stimulate lending which then should, in theory, stimulate the economy.

So basically we're propping up the situation where banks make loans they shouldn't to people who shouldn't be taking them?

That's hardly a stimulus.
Bat One

ozahs,

While I agree with a good deal of what you've said here, this,

If a bank has lax lending criteria, it will naturally result in losses and instability at that bank.

is troubling. The problem isn't the banks' "lax lending criteria." Very few banks lend for their own portfolios, and only a very small percentage of those are problem loans. nearly all mortgage loans, conventional, conforming sub-prime (ALT-A), and non-conforming sub-prime, are sold off immediately or soon after closing and funding.

No, the difficulty is with the banks' past investment strategies and the bundled mortgage-backed securities they purchased that now sit on their balance sheets as "marked-to-market" "toxic assets." It is those "toxic assets" that are at the heart of our credit contraction and economic slowdown.

If the so-called "uptick" rule is restored, as Chairman Bernanke hinted in his testimony this week, and the losses taken by the banks under "mark-to-market" are substantially lessened, we will have gone a long way toward restoring the flow of credit and re-starting economic growth out of the so-called recession.
Buzz

Americans were sold on the idea of the Treasury Department bailing out financial institutions in this country, and partly nationalizing them along the way by taking ownership shares, because the politicians said that we couldn't let the banks fail.

Yea, Paulson and Bush pulled a fast on there. 350 billion to buy bad mortgages, but instead Paulson just gave it to the banks with no restrictions. Very troubling.
robert108

This was just a transfer of wealth to Wall Street who has us convinced that we can not live without them.

Wrong! President Demagogue has transferred a very large amount of wealth to himself, by trying to convince the gullible that we can't live without him.

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I Thought The TARP Program Was For “Troubled Assets”

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