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TARP Program Not a Disaster; Banks Stabilizing

With Bank of America now completing its payback of TARP funds and Citigroup clamoring to do the same, it's time to recognize that the TARP program has not been the disaster that so many critics predicted.

In fact, while there will be a financial cost for this rescue program, it will likely be far less than many had feared.

Even the Federal Reserve, according to its chief Ben Bernanke, will likely at least break even on many its many investments in the financial system. Shocking but true - the government may have done something right this time.

With a stabilizing financial system in sight, it's time to consider what this means for investors going forward. Banks will certainly struggle in the future as they digest problem loans, but there is a glimmer of hope appearing on the horizon.

Bank of America looks to be returning to stability as the much-criticized Merrill Lynch deal begins to yield benefits. Other institutions, like Wells Fargo , also appear to be gaining traction by the way of decent earnings and healthy balance sheets. Both banks have some appeal although the road ahead may not be smooth.

As for Citigroup, despite concerns the rumored stock offering could dilute its shares, the fact is that the government bought into Citi at $3.25/share. The stock closed on Wednesday at $3.86/share, which means any dilution would not hurt the government much; in fact, one could argue the investment may be returned at near cost.

Although there has been harsh criticism of the financial rescue efforts, something appears to be going right as the system stabilizes and capital ratios rise.

To be sure, we should not expect a rapid return to euphoric times but perhaps it's appropriate to recognize that the U.S. government's efforts seem to have had some positive impact. It does appear as if we have moved from the edge. And TARP deserves some of that credit.

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Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top investment 100 advisors in the United States for 2009 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at m@ycmnet.com.