The New York Times reports on the first flood of TARP money:
Most of the banks that received the money are far smaller than behemoths like Citigroup or Bank of America. A review of investor presentations and conference calls by executives of some two dozen banks around the country found that few cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future.Speaking at the FBR Capital Markets conference in New York in December, Walter M. Pressey, president of Boston Private Wealth Management, a healthy bank with a mostly affluent clientele, said there were no immediate plans to do much with the $154 million it received from the Treasury.“With that capital in hand, not only do we feel comfortable that we can ride out the recession,” he said, “but we also feel that we'll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”
So TARP is doing a neat job strengthening the banking industry but not all that much to strengthen the economy. Releasing the second $350 billion of TARP funds was important to Obama, but early statements by his advisers say that they'll use it to get cash to consumers and businesses rather than buttress the balance sheets of random banks. Meanwhile, the Congressional Budget Office just released a first report on the TARP funds. Remember that, at base, these are loans and investments, and there's the expectation that the healthy banks will pay them back or offer eventual returns. They estimate that the government will recoup about three-quarters of its investment -- in other words, that the $750 billion TARP program will actually cost around $185 billion.
