Those poor bankers are now claiming that they got predatory loans from the government. I'm not kidding, that is what the NYT reports, although it didn't quite put the issue in these terms, presumably to spare the bankers from ridicule. The NYT article tells readers that some of the banks are now unhappy with the terms of the TARP and want to return the money they borrowed. However, this early repayment would effectively carry substantial penalties (sort of like the penalties for early payment on adjustable rate mortgages with teaser rates). This raises the tough question of whether borrowers be held responsible for understanding the contracts they sign. Admittedly, these are bankers, so perhaps more leniency needs to be extended, but what about the sanctity of contract. Larry Summers, the head of President Obama's National Economic Council, gave a great lecture on the importance of the sanctity of contract when the topic was the bonuses of AIG executives. Perhaps President Obama can get Mr. Summers to give the same lecture to the bankers who are now complaining about their repayment penalties. Hopefully future news stories will bring these issues into the discussion.
--Dean Baker
