Tuesday, June 09, 2009

Repaying TARP

I've read that there are up to 10 banks that will be repaying TARP funds. This seems to be generating quite a bit of excitement as these banks which were not stable very long ago have now quickly turned around their fortunes.

What I haven't read, and can't find anywhere, is what is the profit to the government. These funds were being "invested" in banks and were going to pay back more than was loaned over the long term. Is the government actually following through on having them repay the amount plus some amount of interest?

I also can't find what happens to the TARP money. Congress basically gave a blank $750 billion check to the treasury. Once they've spent it and money comes back in as these banks repay it, when does it go back into the congressional coffers? When is that money no longer just an extra $750 billion for the treasury to play with? They have already purchased GM, which they are now running and subsidizing both. I don't like the nationalization of any business, and I don't like when the government subsidizes that business at the same time.

Ford is out there right now struggling through the tough economy working through it's own turnaround without a penny from the government. GM is now owned by the government. In order to make sure people can get money, the government handed over billions to GMAC to guarantee financing for GM vehicles. When GM declared bankruptcy the government also started helping GMs suppliers. As it stands now, basically every business related to Ford is being run as a business with no intervention, while everything that is related to GM is getting handouts from the government.

I prefer that tax incentives are used to entice people/companies to do things, rather than money just being handed out. Since there is the new CAFE standards, I think that for each 5% that a company betters the CAFE standards they should get some kind of tax break. It's like setting the standards up as a C- on the grading scale, and rewarding companies for getting A's.