Last week, eight smaller banks paid off $103.3 million of the money they borrowed from Treasury as part of the Capital Purchase Program — part of the financial bailout (TARP). Well, sort of:

In finance and banking you always have to read the fine print. And if you go back to the report, you’ll notice that the fine print accompanying the entries for each of the above exits makes reference either to Footnote 49 or Footnote 50. Footnote 49 reads: “Repayment pursuant to Title VII, Section 7001(g) of the American Recovery and Reinvestment Act of 2009 using proceeds received in connection with the institution’s participation in the Small Business Lending Fund.” Footnote 50 reads: “Repayment pursuant to Title VII, Section 7001(g) of the American Recovery and Reinvestment Act of 2009 — part of the repayment amount obtained from proceeds received in connection with the institution’s participation in the Small Business Lending Fund.”

All of which is to say that these banks repaid cash owed to a program run by the Treasury Department by. . . borrowing from another program run by the Treasury Department.

It’s a little like charging your Visa balance at 28% to your Master Card at 26% and then bragging about having paid off your debt.

The purported purpose of the Small Business Lending Fund, established in 2009 under the stimulus, is to “help create jobs and promote economic growth in local communities across the nation.”

Either that or to help give certain bailout recipients the appearance of having paid off their loans when they’ve simply transferred them to a new debt to the Treasury.

Often, when the government throws out the “bailouts are getting paid back faster than expected” line, it’s an illusion — the above is just one example of the sleight of hand involved.

These games aren’t confined to banks. They extend to the auto bailout as well, and get much more expensive than what we were just talking about above.

Comments

14 Responses to “Banks Pay Back TARP Loans with Other Treasury Loans”

  1. OK_Loyalist on July 24th, 2011 6:45 pm

    The nightmare that never ends!

  2. SignPainterGuy on July 24th, 2011 8:33 pm

    Is this like robbing Peter to pay Peter and telling Paul, "The check`s in the mail" ? OR, perhaps asking Paul, "What, you didn`t get the check already ? It says right here in my checkbook, you`ve been paid !"

    Damn those middlemen !

  3. UncleLumpy on July 24th, 2011 9:57 pm

    A bank would frown on a consumer doing that and have your credir rating shreaded. "Do as I say, not do as I do…"

  4. connie on July 25th, 2011 6:19 am

    Where can I get a loan like this??? Point me in the right direction!!!

  5. Hyperfobea on July 25th, 2011 9:48 am

    Uh, isn't that was GM did, and then turned around and declared a profit followed by across-the-board bonuses some of which were five figures? Kind of like our congressional leaders unanimously voting to give themselves raises … for what … drowning our children's children's children in debt? Take a bow.

  6. Marshall_Will on July 25th, 2011 11:50 am

    Could they possibly be more insulting to our intelligence? How much of a financial type do you need to be to plainly see even in the fattest of times, this math won't work!

    Reeling and still barely licking their wounds, banks of all sizes simply refused to lend when there *was* good collateral involved let alone UNsecured!? They in essence.., weren't functioning as banks. The problem was FDIC was in NO way prepared for the fallout. ( You had to "take a number" to be allowed to fail? )

    What is all the more insulting is, going back to late '06 and certainly by '07, banks were shutting down consumer access to HELOC's. If you bought a $500k home and put $200k DOWN… guess what? Your ATM card ain't working! All that money you put down was LOCKED UP. So banks were already getting preferential treatment and bending contract LAW -before- the Credit Crunch hit.

  7. Granny55 on July 25th, 2011 2:45 pm

    Remember the Democrat mantra: Maxing out the credit card on useless shit, call the bank to raise your credit limit = paying the bills.

  8. TheLiberalMedia on July 25th, 2011 4:57 pm

    Actually, it's like robbing me and you to pay themselves.

  9. SignPainterGuy on July 25th, 2011 7:15 pm

    Even though true to form you missed my point, you commented without name-calling. Who are you and what did you do with TheLiberalMedia ?

  10. Julian Robertson on April 19th, 2012 3:50 pm

    The facts about the hedge fund industry is that Hedge fund managers are generally highly professional, disciplined and diligent.

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  13. Containment Pads on February 24th, 2014 5:20 pm

    These TARP Loans are great. its easy to get.

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