Will Gov't Let Them Pay TARP Back? To Me, It's Doubtful

The news this morning is that some firms, primarily Goldman Sachs, want to return their TARP funds. With the political outcry, these firms view the proposed compensation regulation as excessively restrictive and as an impetus for the best employees to leave.

For a while, I have thought that the government will not allow firms to return TARP funds. There are a couple of reasons for this view.

First, it is important to note where the government is now as compared to when the TARP funds were issued. Now the government owns a huge percentage of Citigroup common stock. To allow some firms to get relief from TARP restrictions is to place Citigroup at a significant competitive disadvantage, since Citi's best employees will be wooed by firms that are not constrained.

Also, should the government allow TARP to be paid back, it loses an immense amount of control. Perhaps it is my Ayn Rand-like outlook, but I have not seen many situations where government control has been taken and then given back in relatively short order.

So now, it is in the best interest of government officials to prevent large firms from returning TARP funds in order to preserve the taxpayer investment in Citigroup.

Am I being too cynical?

 

[CountryBoy]

Cynical? That's in the eye of the beholder. I would be suprised if they let GS pay back their TARP funds, because they forced some banks to accept TARP Funds so they wouldn't have an advantage over the failing banks.

Ain't that the way Capitalism is suppose to work? The dumb fail and the smart succeed. So what kind of Goverment are we heading to with the bailout policy?

CB

 

[James48843]

Also, should the government allow TARP to be paid back, it loses an immense amount of control. Perhaps it is my Ayn Rand-like outlook, but I have not seen many situations where government control has been taken and then given back in relatively short order.

Happens all the time with the FDIC, when small banks go belly up. FDIC works the books, figures out the best way to convert or dispose of assets, close offices, change management, and then sell off what's left to another bank, the quicker the better.

FDIC doesn't want to run banks- they just want them cleaned up for a new owner.

 

[Scribbler]

That is true -- the FDIC does a good job of doing what you described.

But when the federal government has preferred stock (or common in the case of C), I would think there is a desire to exert more control over the bank.

Probably the only thing politically worse than bailing out a company with public money is the backlash that would result from the equity being wiped out.

Happens all the time with the FDIC, when small banks go belly up. FDIC works the books, figures out the best way to convert or dispose of assets, close offices, change management, and then sell off what's left to another bank, the quicker the better.

FDIC doesn't want to run banks- they just want them cleaned up for a new owner.