Last week was a milestone for US treasury secretary Tim Geithner. He finally got to play the hero. The morning of June 9, Treasury notified 10 financial institutions, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, US Bancorp, and Capital One Financial, that they were “eligible to complete the repayment process” for the capital they received under the Troubled Assets Relief Program (TARP). In other words, they would be allowed to pay back $68.3 billion. Even though they really owe $229.7 billion. That we know of. But Geithner didn’t mention that last bit. Instead, he professed that “these repayments are an encouraging sign of financial repair,” with the caveat that “we still have work to do.”
The “we” he refers to is himself and Wall Street, both of whom are getting a good deal out of this fractional payback scheme. The agreement frees the banks from restrictions on executive pay or, worse, their general practices, but it still allows them to keep the cash they’ve received through non-TARP venues like the FDIC Temporary Liquidity Guarantee Program— or the massive sums the banks recovered from AIG (thanks to its own federal bailout) to cover their losses on credit derivatives. Not to mention any cash provided by the mother of all cheap loan programs—the Federal Reserve.
Geithner, for his part, gets to convey the message that things are looking up. “These repayments follow a period in which many banks have successfully raised equity capital from private investors,” stated the press release. “Also, for the first time in many months, these banks have issued long-term debt that is not guaranteed by the government.”
Well, of course certain banks have raised some money on their own: Firms have a tendency to look a whole lot better when they’re backed by government capital and have cheap federal loans sitting on their books. Private investors notice that sort of thing. But more troubling than the misplaced praise is the fine print that accompanied the announcement: “These repayments,” the department noted, “help to reduce Treasury’s borrowing and national debt. The repayments also increase Treasury’s cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.”
This statement belies some accounting sleight of hand.
The Big Bank Bailout Payback Bamboozle – Nomi Pins, Mother Jones
some accounting sleight of hand
Last week was a milestone for US treasury secretary Tim Geithner. He finally got to play the hero. The morning of June 9, Treasury notified 10 financial institutions, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, US Bancorp, and Capital One Financial, that they were “eligible to complete the repayment process” for the capital they received under the Troubled Assets Relief Program (TARP). In other words, they would be allowed to pay back $68.3 billion. Even though they really owe $229.7 billion. That we know of. But Geithner didn’t mention that last bit. Instead, he professed that “these repayments are an encouraging sign of financial repair,” with the caveat that “we still have work to do.”
The “we” he refers to is himself and Wall Street, both of whom are getting a good deal out of this fractional payback scheme. The agreement frees the banks from restrictions on executive pay or, worse, their general practices, but it still allows them to keep the cash they’ve received through non-TARP venues like the FDIC Temporary Liquidity Guarantee Program— or the massive sums the banks recovered from AIG (thanks to its own federal bailout) to cover their losses on credit derivatives. Not to mention any cash provided by the mother of all cheap loan programs—the Federal Reserve.
Geithner, for his part, gets to convey the message that things are looking up. “These repayments follow a period in which many banks have successfully raised equity capital from private investors,” stated the press release. “Also, for the first time in many months, these banks have issued long-term debt that is not guaranteed by the government.”
Well, of course certain banks have raised some money on their own: Firms have a tendency to look a whole lot better when they’re backed by government capital and have cheap federal loans sitting on their books. Private investors notice that sort of thing. But more troubling than the misplaced praise is the fine print that accompanied the announcement: “These repayments,” the department noted, “help to reduce Treasury’s borrowing and national debt. The repayments also increase Treasury’s cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.”
This statement belies some accounting sleight of hand.
The Big Bank Bailout Payback Bamboozle – Nomi Pins, Mother Jones