TARP recipients falling behind on payments

Especially in light of the soft touch on Wall Street, this is very troubling. Neither the Bush administration nor the Obama administration has had the stomach to be firm with the financial industry despite their deep responsibility for the recession. Maybe it’s wishful thinking or perhaps too many have bought into the Wall Street centric view of the world. Wall Street is important for the future growth of the US but we can’t overlook the severe damage that they inflicted on everyone else.

To repeat, rescuing the financial industry had to be done. There is little doubt that the recession could have been much more painful without the bailout. The terms were all too often botched, which is why we are seeing failures, more money and a two-tiered financial industry based on the haves and have-nots. (Goldman Sachs, obviously is on the “haves” list.) So will the banks will be treated differently from individuals who can’t meet the terms of their agreements. Surely they will, but this round needs to push back against the banks instead of providing a wish list for the banks. As we are seeing from AIG and others, the initial round was about as poorly implemented as possible. Unfortunately, the current team were leading the first bailout so it’s hard to imagine any major improvement or lessons learned. Washington Post:

Officials poured about $700 billion into investments in scores of companies, from giants such as the automaker General Motors and the insurer American International Group to smaller regional banks. Of them, 46 had missed required dividend payments to the government as of the end of September, according to the inspector general overseeing the program.

On Nov. 6, United Commercial Bank of San Francisco failed, becoming the first recipient of the Troubled Assets Relief Program, or TARP, to collapse. The cost to taxpayers: $299 million.

Analysts expect more bailed-out firms to fail in the months ahead. Others may survive but will struggle to repay the government. Steven Rattner, the former head of the government’s efforts to bail out the auto industry, said recently that the full public investment in GM is unlikely to be repaid. Meanwhile, AIG is dismantling itself, selling healthy subsidiaries at what critics say are bargain prices in an all-out effort to get cash to repay the government.

An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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