Interesting article in USA Today yesterday. It states in pertinent part:
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid, a USA TODAY/American University review found.
The reduction of credit during the worst of the recession raises questions about whether the $247 billion assistance program achieved one of its primary goals: to stimulate the economy by reviving the flow of credit to businesses and individuals.
• Lending fell. The amount of loans outstanding to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009, at banks that participated in TARP compared with a 6.2% drop at banks that didn't.
• Employee pay rose. Average pay at banks getting aid rose 9.4% in the program's first year. By contrast, non-TARP banks increased salaries 1.8%.
• Cost-cutting limited. Banks in TARP cut costs less than those outside the program. Government-aided banks increased branches by 2.7% while non-TARP banks cut branches by 1.2%.
http://www.usatoday.com/money/industries/banking/2010-04-21-tarp-banks_N.htm
Some on this board have claimed TARP was a big success (hello, sh76). What do they make of these figures?
Originally posted by no1marauderMaybe TARP wasn't as big a success as I thought. I freely admit not knowing enough about the economy to make a truly informed judgment. Maybe you're right.
Interesting article in USA Today yesterday. It states in pertinent part:
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid, a USA TODAY/American University review found.
The reduction of credit during the worst ...[text shortened]... board have claimed TARP was a big success (hello, sh76). What do they make of these figures?
That having been said...
What I do know is that:
- The institutions that received TARP money did not go under
- Most of the institutions that received TARP money have repaid much or all of it. Eventually most or all of the TARP money will be recouped... or so says President Obama, anyway
- The economy has recovered; or at least is on the road to recovery
Incidentally, raising employee pay and preventing branch closures are the kinds of things that stimulate the economy. That's the theory on which the stimulus package was based. OF course, I'm assuming the pay increases filtered down to the ham and egg employees and didn't simply add millions to the bonuses of the execs...
I do have a couple of questions though: How would you re-start the flow of credit? By unfunded government fiat ordering the hurting banks to lend? What was the real alternative to TARP? Allowing the big banks to fail? Would the smaller banks have taken that as a signal to open up the credit spigot? I might think the opposite: that the failure of the big banks would cause the smaller banks to tighten their own lending as well. As it is, banks know that if they lend too much and things go south, at least there's a chance the government will bail them out.
TARP was a "success" in the sense that (to my knowledge) the taxpayer will probably get more money back than was put in the TARP-fund.
It was a failure in the sense that if a company is "too big to fail" it should not be a private company in the first place, so regulators failed in assuring banks would be sufficiently small so that they could fail without doing too much damage to the economy. Bailing out private companies combines the disadvantages of a "free" market and a government-run business.
Another comment: if lending fell you cannot infer that TARP failed to encourage lending - perhaps lending would have fallen much more had there been no TARP (this fallacy is known as post hoc ergo propter hoc).
The main problem is that we had a bunch of banks that were "too big to fail" - the purpose of TARP was simply to prop up the failing banks enough to prevent total financial panic and the disastrous chaos it would have created. I don't believe that even sh76 saw TARP as being anything more than that.
The current finance reform debate is focusing on getting at the underlying problem of what to do about banks that become "too big to fail". Banks that know they're "too big to fail" now know they can be as reckless as they want, knowing that the taxpayers will bail them out again with another TARP plan if things go badly.
A lot of conservatives say we should just let them all fail the next time there's a crisis. But when the stock market is plunging at 500 points per day, it's easy to imagine even the most diehard conservatives giving in and enacting a bailout.
The current finance reform plan seems to include requiring all the banks to pay into a some sort of an "insurance fund" that will be used by the government to dismantle failing banks in some sort of orderly fashion without having to put taxpayer dollars at risk. The general consensus among non-conservatives seems to be that these reforms don't go as far as they should, but it's better than what we have now.
The consensus among conservatives seems to be in favor of continuing the status quo (which would mean more bailouts and TARPs the next time the big banks fail), although it appears that this consensus has begun to crack.
I'm with sh76 where I'm not an expert on this issue, but I do believe this...
Had an avalanche of the biggest banks in the country, like Bank of America, Citibank, and many others been allowed to go bankrupt the economic impact would have been epic. Could TARP had been structured better? Did certain banks take advantage? Absolutely. But I don't think the right answer would have been to let them all crash.
Originally posted by KazetNagorraRegarding your "another comment" if the options were only TARP or no TARP then perhaps there'd be some validity to your comment (though it seems a bit silly to suggest that one cannot evaluate the probability of what lending would have been without TARP). However, measures were proposed at the time that would have directly increased lending (such as creating a government agency with a fairly large pool of funds to lend). But since the primary stated purpose of TARP was to stabilize the financial sector so lending would return to higher levels these ideas were discarded. That TARP banks then drastically cut lending even after receiving vast sums from the US Treasury is an inconvenient fact for its defenders.
TARP was a "success" in the sense that (to my knowledge) the taxpayer will probably get more money back than was put in the TARP-fund.
It was a failure in the sense that if a company is "too big to fail" it should not be a private company in the first place, so regulators failed in assuring banks would be sufficiently small so that they could fail wi ...[text shortened]... len much more had there been no TARP (this fallacy is known as post hoc ergo propter hoc).
Originally posted by no1marauder
Regarding your "another comment" if the options were only TARP or no TARP then perhaps there'd be some validity to your comment (though it seems a bit silly to suggest that one cannot evaluate the probability of what lending would have been without TARP). However, measures were proposed at the time that would have directly increased lending (such as crea ...[text shortened]... ven after receiving vast sums from the US Treasury is an inconvenient fact for its defenders.
However, measures were proposed at the time that would have directly increased lending (such as creating a government agency with a fairly large pool of funds to lend).
But since the primary stated purpose of TARP was to stabilize the financial sector so lending would return to higher levels these ideas were discarded.
Remember that Bush was still president. And remember that it was hard enough convincing enough people in Congress that TARP itself wasn't an evil socialist plot to turn all the banks into Barney Frank's personal slush fund.
Originally posted by no1marauderI agree. I also feel the same about the stimulus package. Another example is Ford. THey are the ONLY US automaker that did not take government money, but now look at how well they are doing compared to the likes of GM. There is no doubt about it, take government aid at your own risk. From what I hear these banks will soon be paying other taxes for their handouts.
Interesting article in USA Today yesterday. It states in pertinent part:
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid, a USA TODAY/American University review found.
The reduction of credit during the worst ...[text shortened]... board have claimed TARP was a big success (hello, sh76). What do they make of these figures?
Originally posted by MelanerpesThere was a brief opportunity to actually do things that would have helped the economy rather than pander to large banks that had incompetently managed to render themselves insolvent.However, measures were proposed at the time that would have directly increased lending (such as creating a government agency with a fairly large pool of funds to lend).
But since the primary stated purpose of TARP was to stabilize the financial sector so lending would return to higher levels these ideas were discarded.
...[text shortened]... f wasn't an evil socialist plot to turn all the banks into Barney Frank's personal slush fund.
Originally posted by sh76- The economy has recovered; or at least is on the road to recovery
Maybe TARP wasn't as big a success as I thought. I freely admit not knowing enough about the economy to make a truly informed judgment. Maybe you're right.
That having been said...
What I do know is that:
- The institutions that received TARP money did not go under
- Most of the institutions that received TARP money have repaid much or all of it. Ev ...[text shortened]... too much and things go south, at least there's a chance the government will bail them out.
Despite what politicians say in both UK and US there is no way the economy has 'recovered' (ie both GDP and employment are no where near the pre-recession figures). Its even doubtful that this recovery will be sustained and from what I heard on CNN a couple of weeks ago at current recovery rate the US employment will take almost 20 years to recover fully. (And expect another recession before then!)
Seems to me only China is doing well ..........
Originally posted by wolfgang59One word, "laffer curve". Actually twe words, but who's counting? It certainly is not the US government who is soon going to double the national debt. Soon taxation will be required because of such debt as it burdens down the economy to the point that revenue to the federal government decreases further and further with each new tax.
[b]- The economy has recovered; or at least is on the road to recovery
Despite what politicians say in both UK and US there is no way the economy has 'recovered' (ie both GDP and employment are no where near the pre-recession figures). Its even doubtful that this recovery will be sustained and from what I heard on CNN a couple of weeks ago at curre ...[text shortened]... And expect another recession before then!)
Seems to me only China is doing well ..........[/b]
Originally posted by whodeyWhat makes you think that point will be reached in the US, where taxation is far below that of most other industrialized nations, which appear to have no problems gathering enough revenue?
One word, "laffer curve". Actually twe words, but who's counting? It certainly is not the US government who is soon going to double the national debt. Soon taxation will be required because of such debt as it burdens down the economy to the point that revenue to the federal government decreases further and further with each new tax.
Originally posted by KazetNagorraAll I have to do is look at New Jersey. They have upon them one of the largest tax burdens of any US state with unemployment and deficits to boot. Why?
What makes you think that point will be reached in the US, where taxation is far below that of most other industrialized nations, which appear to have no problems gathering enough revenue?
Originally posted by whodeyBecause their expenses are high, I suppose. Norway has one of the largest tax burdens of any country and low unemployment and surpluses to boot. Why?
All I have to do is look at New Jersey. They have upon them one of the largest tax burdens of any US state with unemployment and deficits to boot. Why?
Originally posted by whodeyBecause every township and borough here (and there are WAY too many townships and boroughs here but that's another issue) wants their school system to have every last bell and whistle, while relying on state aid to pay for it. Well the state is cutting that aid and now towns are starting to realize that bells and whistles cost money and they're starting to cut back.
All I have to do is look at New Jersey. They have upon them one of the largest tax burdens of any US state with unemployment and deficits to boot. Why?