The NYT reports that many banks are making plans to return the money they borrowed through the TARP as quickly as possible. While the article points out that the banks are upset about the TARP conditions, it does not explicitly point out that they may still turn to other forms of government aid that do not come with conditions. Specifically, the banks still have access to special Fed lending windows that allow them to borrow money at below market rates. They can issue bonds insured by the FDIC (this is mentioned) and they have been beneficiaries of taxpayer dollars used to pay off AIG debts. It is not clear whether more money will be funneled, without conditions, from taxpayers to the banks through AIG. In addition, the Treasury Department's Public Private Investment Program would subsidize the purchase of bad assets from the banks allowing them to command an above market price. This program also would not impose conditions on the participating banks.
--Dean Baker
