Each time it reports a TARP payback, the Treasury includes a stock line in its releases that goes something like this: “Treasury currently expects that TARP investment programs taken as a whole…will result in little or no cost to taxpayers.”
Taxpayers, per se? Perhaps not, at least not in a direct way from TARP.
Homeowners are another story. After all, it was the housing market—the crippled housing market, which is now in the throes of a double-dip with horrendous sales and price trends—that suffered the most and continues to suffer.
Last year saw a record 2.9 million foreclosures, and RealtyTrac reports that 1 in every 577 homes received a foreclosure notice in February.
The housing market suffered after banks loaned money to people who couldn’t pay it back, then packaged those loans into bonds which were repackaged into collateralized debt obligations and sold at will to deep-pocketed Wall Street investors.
When the underlying value of the bonds collapsed as foreclosures built, both the financial system and the real estate market underpinning those sucker’s bets collapsed.
So as Treasury counts the money and sells TARP as the greatest thing since sliced derivatives, the final tally is far from finished. Any thought about creating the Department of Bank Bailouts probably will be on hold.
“They cut out the cancer and passed it right along to Fannie and Freddie,” the National Taxpayers Union said of the TARP execution. “The banks have issues with the current foreclosure mess, but the worst loans are no longer their problem, they’re taxpayers’ problem.”
Companies mentioned in this post
American International Group
First Horizon National
1st Source Corp
Fifth Third Bancorp
National Penn Bancshares
Bridge Capital Holdings
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