Angry Banker

The TARP Deadbeats

While it may be true that a number of the smaller firms will not be able to repay TARP, this is not necessarily a reason to characterize TARP as a failure. For instance you say that Citigroup would have been wiped out without TARP. But because Citigroup is such an important part of the economy (the too-big-to-fail argument is a separate matter), if the government had not nursed it back to health, the repercussions on the broader market would have been much worse, with many more failures of not only financial institutions, but of firms in every sector there is. In other words, the nascent recovery we are starting to see materialize would have never happened. Therefore the "greater good" was actually served better by asking for help from the greater good's pocketbook.

As for the smaller banks, I suspect that they will get swallowed up by the big guys, who will then assume their TARP repayment obligations. (Again, I recognize this makes the too-big-to-fail firms even bigger, but save that argument for a separate discussion)