Where Did the TARP Money Go?
Dec 23, 2008
Posted by Jody Eisenman | Filed under Uncategorized
Imagine you meet some guy who’s down and out. He used to be a major player on Wall Street, but now he’s facing hard times. He begs you for a rather substantial loan. He tells that if he doesn’t get money soon, he will be facing bankruptcy and he hints that this could severely hurt lots of your friends who invested with him. On the other hand, he tells you that if you would just grant him this rather huge loan, he will not only survive, but will actually help lots more of your friends so that everyone benefits. Although he’s sort of vague about both how he will pay you back and what exactly he will do with the loan, you are persuaded to give it to him. He thanks you profusely and then goes on his way. A few months later, it seems that your friends are still in bad shape; in fact, they are worse then before! So, you go seek out your loan recepient and ask him very simply, “What did you do with the money I so graciously lent you under such favorable terms?” Imagine your surprise when he absolutely refuses to tell you what he did with any part of the money!
Apparently, the Associated Press decided to question 21 banks who received at least a billion each of the $350 billion in TARP money. Not a single bank would provide a specific answer. Here’s a link from Yahoo: http://news.yahoo.com/s/ap/20081222/ap_on_go_ca_st_pe/meltdown_secrets
Of course, I can think of a very good reason why the banks refuse to answer. Thanks to the incredibly generous and highly speculative ratios that the government allowed these banks to leverage their balance sheet at, (along with some poor investments in creative mortgage financing) most of these banks have lost the great majority of their equity. Many of them could very well be bankrupt right now save for the governments’ (read:taxpayers) largesse. You think any of them want to admit their that? I don’t. In addition, thanks to Paulsons’ and Bernakes’ high pressure efforts, there was absolutely no requirement that the banks loan out even a penny of their TARP bailout money. My guess is that they have actually lent out very little, preferring to shore up their own shaky balance sheets. Will anyone actually demand some accountability?
January 10th, 2009 at 8:06 pm
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January 12th, 2009 at 9:22 pm
Jody,
With the demand for accountability as to where bank’s money is being allocated, wouldn’t it only make sense to then know exactly where this TARP money is going? How is the blanket being pulled over people’s heads? Isn’t there an organization that is on top of accounting for this money?