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Forget Paying Back Those TARP Funds Just Yet

Written by Jeannette Di Louie, Assistant Editor

After the shameless bullying used on financial institutions during the last three months of the past administration, and the superfluous control exerted on those same businesses during the current administration, I can’t say I’m all that surprised at today’s latest government mandate towards the banks.

Ten out of the nineteen banks forced to undergo “stress tests” have already been told that they can’t pay back TARP funds until they submit plans to boost capital, actually raise the actual funds, and convince the government that they don’t need any more help.

But while those other nine banks must have breathed a sigh of relief that they could finally pay back the funds forced on them, even they are facing further restrictions, despite Treasury Secretary Timothy Geithner and his team telling them that they’ve been cleared.

Now, they’re finding out that they may or may not still have to…

  • Wait until after June 8th to even hope to pay anything back
  • Wait for the government’s permission even after that
  • Possibly pass another stress test
  • Issue debt that isn’t government guaranteed
  • Demonstrate the ability to self-fund in the market
  • Win the approval of their banking supervisor

And if you’re looking for any explanations as to why even the “clean” banks have to follow continued restraints, then good luck. Because while we’re finding more out about the stress tests on a weekly basis, we still haven’t gotten to the key answers that would clarify the government’s purpose in all of this.

Is it because the banks really aren’t as healthy as our leaders led us to believe, is it a control issue, or is there some third potential reason?

Sadly, the truth is that we just don’t know. We can make educated guesses of course, but until the Obama administration comes clean on this one, or some whistleblower decides to inform the American Public why these measures are being taken, that’s all we have: guesses.

Jeannette Di Louie

Disclosure: No positions