Will Congressional Bailouts Stop Sinking the Ship?

December 30, 2009 by Debbie Dragon

Congress made history in 2009 by loaning billions of dollars to failing banks across the country in an effort to boost the disastrous economy. Many Americans were outraged as it began to appear as though big business could mishandle exorbitant amounts of money and just sit back and let the federal government toss money at the problem. Now that several months have passed since the bailouts, did they work? Is the economy rebounding? Is the money gone for good or will anyone actually pay it back?

Much to the surprise of many, over $164 billion dollars of the money spent on the TARP (Troubled Assets Relief Program) has been paid back already, with another $11 billion expected to be restored to the federal coffers by the end of 2010. Citigroup and Wells Fargo are responsible for the repayment of $45 billion so far and Bank of America has repaid its outstanding debt to the Treasury. Some of the other banks to repay their TARP loans included J. P. Morgan Chase & Co., Goldman Sachs Group Inc, Morgan Stanley, Capital One Financial Corp., and BB&T Corp. Wells Fargo CEO John Stumpf cited the loan repayment as a sign the banking industry would get back to the business of focusing on everyday Americans when he said, “With repayment of the TARP investment, we can intensify our focus on what we do best: helping consumers and businesses achieve financial success,”

Upon repayment, Citi CEO Vikram Pandit said, “We owe the American taxpayers a debt of gratitude.” American taxpayers are possibly equally, if not more excited about the repayment of the debt of money, rather than the debt of gratitude, however. The fact that there are still 55 banks that are delinquent in their payments isn’t as heartwarming. Many of those outstanding debts involve smaller banks, but two large banks still owing the Treasury are PNC Financial Services Group and SunTrust Banks, Inc.

Although the TARP investments, totaling $245 billion were expected to cost $76 billion, it now appears the Treasury (and the taxpayers) will actually earn a profit from the entire deal, through early repayments, dividends, warrant sales and interest earned. There has already been a profit of $16 billion, with more expected as repayments continue.

One of the most controversial TARP payments was to AIG (American International Group) who received bailout money twice and still paid huge bonuses to executives, including a company retreat in California costing more than $440,000 just days after receiving the bailout money. It remains a question whether AIG will ever repay the TARP funds it received.

There are signs America’s economy is beginning to recover from its biggest downturn since the Great Depression of the 1940s. Did the TARP funds play a part in the turnaround? While it is entirely possible they did, there seems little doubt that the repayment of those funds is a good thing for every American- except perhaps a few executives that may not see the same level of bonuses in their futures that they saw in the past.

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