Why can’t banks just pay back the TARP money if they don’t need it?

Makes sense … right? If a bank doesn’t need it, it should give it back, with interest. This is what we want. It is the right thing to do.

Unless there is something else going on.

Here’s a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.

Ummm … er … ah …

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2 thoughts on “Why can’t banks just pay back the TARP money if they don’t need it?

  1. Hmm, “true story” and “Fox News” in the same sentence.. that starts alarm bells ringing already, not to mention the fact that it impossible to verify as is.. 🙁

  2. @Chris

    Compared to the other outlets here, Fox News has been, oddly enough, fair and balanced. This was prior to Glen Beck and his … er … whatever that is …

    In the last election, they were pretty much the only news organization that went after both candidates. Some, such as MSNBC/CNBC were so clearly in the tank for one of the candidates, that it was hard to get anything close to an accurate report out of them.

    Relative to the others, they are good. Which says something about the others if you think they are bad.

    I should say that I agree in general that the MSM (main stream media) do a piss-poor job on reporting … accuracy is an accident, balance is out the window in favor of ratings.

    Maybe this is why they are all (most of them) augering in for a rough landing. Lots of papers here in the US are going under … due to ad sales, as well as subscription drop offs. Few people really want to get biased news from liberal rags or conservative screed sheets. They’d like something that appears … I dunno … unbiased?

    FWIW, though you don’t hear about it in the MSM (Fox or others) there is a growing backlash against Mr Obama’s budget (and several of his other efforts). You won’t read about it, unless you start digging.

    Most of the MSM here in the US is Left leaning to hard/radical left (MSNBC/CNBC), so it is often impossible to get specific stories out of them. Fox seems to be more centrist, but then they hire Glen Beck …

    Erp. Credibility? Nah.

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