Why TARP payback may be bad idea

Steve Henn Jun 8, 2009
HTML EMBED:
COPY

Why TARP payback may be bad idea

Steve Henn Jun 8, 2009
HTML EMBED:
COPY

TEXT OF STORY

Bill Radke: The White House has a message for bailed-out companies: You took taxpayer money, we get to regulate your pay. The administration is expected to unveil new compensation rules this week. This morning’s New York Times reports companies that have gotten two rounds of federal bailouts will have to submit any major executive pay changes to a new compensation monitor.

Rules like that are one reason so many banks want to pay back their bailout money. Today, the Treasury Dept will announce which banks get to do that. But are these banks really healthy enough to go it alone? Here’s Marketplace’s Steve Henn.


Steve Henn: If the Feds tries to play it safe and keep weak banks from exiting TARP, those banks could face a crisis in confidence.

Paul Miller: Banks live off confidence. They need to have people, businesses, employees to have confidence in the institutions. And now, what we call the scarlet T, i.e. the Tarp, is now a sign of weakness.

Paul Miller is an analyst with Friedman’s Billings Ramsey. He says if regulators let weaker banks try to walk on their own, taxpayers could end up bailing them out again. That’s because the economy’s worse than even the worst scenarios written into those bank stress tests.

Miller: The government, by allowing people to pay back TARP, is starting to pick the winners and the losers.

And all bankers are eager to get out from under the program. Executives don’t like the pay limits or the stigma. So even weak banks will be pushing hard to escape.

In Washington, I’m Steve Henn for Marketplace.

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.