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The point is that many of them including Goldman Sachs would have collapsed outright without the bailout money. Now that the funds gave them enough liquidity to

by codexon 17y ago

The point is that many of them including Goldman Sachs would have collapsed outright without the bailout money. Now that the funds gave them enough liquidity to survive the crisis, they were given money to increase the cash flow in a depressed markets: the crucial role that banks play in society. Instead of doing this, they decided to use the money to pay their employees gigantic bonuses, or by using it to acquire smaller banks that didn't get TARP money. The banks even pumped several hundred million dollars into lobbying. This is a clear abuse of the system and the only reason more people aren't angry about what's happening is because they don't know something like this is happening.

gaius 17y ago
GS had already arranged to be "bailed out" by Warren Buffett. They took the TARP money because the government made it mandatory to do so (so banks that needed it wouldn't be seen as weak in the marketplace). They simply sat on it, then repaid it with interest (20% APR, how likely is the government to get that from the bond market?!). There is a paradox here: banks were simultaneously supposed to a) increase their lending and b) increase their capital reserves. Those two are mutually contradictory, and the banks chose b. I'm not saying that TARP wasn't abused at all, but I will say that it presented an enormous moral hazard. Also here in the UK, the government knew that the state of Lloyds was far worse that it was, and didn't tell anyone 'til the risk had been transfered to the market... If a bank did that, people would be going to jail for insider trading.
- codexon 17y ago
  GS had already arranged to be "bailed out" by Warren Buffett. They took the TARP money because the government made it mandatory to do so (so banks that needed it wouldn't be seen as weak in the marketplace). They simply sat on it, then repaid it with interest Warren Buffet only invested $5 billion into GS. Look at their cash flow here: http://www.google.com/finance?q=NYSE:GS&fstype=ii http://www.google.com/finance?q=NYSE:GS&fstype=ii $5 billion is peanuts compared to the amount of money being lost during that period, but of course it is impossible for outsiders to tell for sure if GS needed the TARP money, there were strong signs that say yes.

by codexon 17y ago

gaius 17y ago

GS had already arranged to be "bailed out" by Warren Buffett. They took the TARP money because the government made it mandatory to do so (so banks that needed it wouldn't be seen as weak in the marketplace). They simply sat on it, then repaid it with interest (20% APR, how likely is the government to get that from the bond market?!). There is a paradox here: banks were simultaneously supposed to a) increase their lending and b) increase their capital reserves. Those two are mutually contradictory, and the banks chose b. I'm not saying that TARP wasn't abused at all, but I will say that it presented an enormous moral hazard. Also here in the UK, the government knew that the state of Lloyds was far worse that it was, and didn't tell anyone 'til the risk had been transfered to the market... If a bank did that, people would be going to jail for insider trading.

codexon 17y ago
GS had already arranged to be "bailed out" by Warren Buffett. They took the TARP money because the government made it mandatory to do so (so banks that needed it wouldn't be seen as weak in the marketplace). They simply sat on it, then repaid it with interest Warren Buffet only invested $5 billion into GS. Look at their cash flow here: http://www.google.com/finance?q=NYSE:GS&fstype=ii http://www.google.com/finance?q=NYSE:GS&fstype=ii $5 billion is peanuts compared to the amount of money being lost during that period, but of course it is impossible for outsiders to tell for sure if GS needed the TARP money, there were strong signs that say yes.