Marketplace Scratch Pad

Taxpayers aren’t getting a "refund"

Scott Jagow Apr 15, 2009

When you hear about banks like Goldman Sachs returning their TARP money, you might think that means the taxpayer is getting something like a refund. Or that those funds will go to reducing the government’s bailout debt. No. In fact, it may mean the government will spend more money.

Clusterstock explains it this way:

You see, returned TARP funds become part of the general revenue of the federal government. The money is treated just like money paid by taxpayers. It simply becomes part of the income of the government that will be spent by politicians and bureaucrats. There’s no lockbox or segregated fund. It works just like Social Security taxes: the income just gets spent for whatever the government decides to spent money on.

Not only that, but when banks pay back their money, that increases the amount available in the TARP fund. The $700 billion is the maximum amount that can be outstanding at any one time.

Right now about $134.5 billion remains out of the original $700 billion. When Goldman repays the its $10 billion TARP funding, that amount will grow to $144.5 billion.

Which means the government can give it to another bank (or insurance company).

It doesn’t go back to the taxpayer. Of course, you weren’t taxed in order to create the $700 billion either. Not yet anyway.

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