Fallout: The Financial Crisis

Banks will get new rules to repay TARP

Marketplace Staff May 6, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

Banks will get new rules to repay TARP

Marketplace Staff May 6, 2009
HTML EMBED:
COPY

TEXT OF STORY

Steve Chiotakis: You know, some of the nation’s banks want to show their strength by paying back the federal money they got from the Troubled Asset Relief Program. As early as today, they could find out the rules for that repayment. From Washington, Tamara Keith reports.


Tamara Keith: Banks are not big fans of the restrictions on executive compensation and other government pressures that come with the TARP. Some didn’t even want the money in the first place.

Scott Talbot is with the Financial Services Roundtable, an industry group:

Scott Talbot: The test for returning TARP money should be the ability of the bank to demonstrate that it doesn’t need it anymore.

That’s what the government wants and more. Banks would reportedly have to forego the Federal Deposit Insurance Corporation’s debt guarantee program. That allows banks to borrow private money at a fairly low cost.

Talbot: We want to keep lending going and the liquidity program at the FDIC helps encourage that. By asking the bank to step outside of that program that would decrease lending, which is a bad thing for the economy right now.

Banks have borrowed more than $300 billion since last fall with the assistance of this program.

In Washington, I’m Tamara Keith for Marketplace.

Chiotakis: By the way, Sheila Bair, the head of the FDIC, told a Senate hearing this morning that the “too big to fail” mentality must end. She proposes a so-called “systemic risk council” made up of the U.S. Treasury, the Federal Reserve, Securities and Exchange Commission and the FDIC. They would monitor large institutions and their potential risks to the system.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.