TARP Repayment: Yes, There Are Restrictions

There is a meme (did you know that word was invented by Richard Dawkins?) going around the blogosphere that, in essence, says Geithner doesn’t have the right to prevent T.A.R.P. repayment, even if no fresh capital is raised. This is incorrect. From the Goldman Sachs T.A.R.P. agreements [pdf!] governing the capital infusion (it’s hidden on the site, but there!):

(Emphasis [yes, that's the green underlining] mine.)

Seems, then, that it’s pretty clear. Whole or partial payments, once allowed by a regulator, require fresh equity raised from a “Qualified Equity Offering.” This is a defined term, and the document defines it as follows:

So, it seems pretty clear that there are conditions. Now, maybe these aren’t the systemic considerations, but that’s likely why the regulatory approval is required, especially in conjunction with the “stress test,” which we’ve discussed here at length.

Comments

[Moon Kil Woong:]

I think the taxpayer would also like the interest payments and early retirement penalties on the loan as well. I'm sure the bank is aware of the concept of interest (or I hope they do) and early payment penalties since they are listed on avery mortgage they write.

And by the way, is Goldman going to pay the government back for the back end bailout through AIG? Otherwise aren't they just using our own money to pay us back so they can keep filling their wallet with fat salaries and bonuses? Come on, is this America we are living in or just another corrupt 3rd world country?

Apr 22 02:18 AM

[whisperonth...:]

"...is this America we are living in or just another corrupt 3rd world country? "
Does anyone really know anymore?

Apr 22 10:34 PM