Banks to Use Fed Funds to Repay…Fed Bailout
- Posted on March 30, 2011 at 6:22pm by
Emily Esfahani Smith
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WASHINGTON (AP) — Some banks will use money from a government program aimed at increasing small business loans to repay their federal bailouts, according to the Treasury Department official who oversees the bailout program.
In a brief interview, Acting Assistant Secretary Timothy G. Massad said Wednesday that Treasury has yet to grant approval to any banks seeking to use money from the Small Business Lending Fund to repay their bailouts, “but they will.” Last year’s law creating the lending program lets banks use money from that program to repay their bailouts.
“I do expect them to approve the applications of many TARP recipients to refinance their loans under the small business lending fund,” he said, using the acronym for the Troubled Asset Relief Program, the bailout’s formal name.
Sen. Charles Grassley, R-Iowa, complained in a recent letter to Treasury Secretary Timothy Geithner that using one federal program to repay another would be “an egregious example of budget gimmickry.”
Grassley wrote that he worries that the Obama administration is using the small business program as “a bailout for banks and a pass-through to falsely show profits in the TARP program.”
Massad’s comments came shortly after he told Congress that Treasury is now running a profit on the portion of the $700 billion federal bailout that went to banks. None of the bank bailout repayments Treasury has received so far come from the loan program, he said.
Like the bailout, the loan program was a response to the economic downturn, in this case an effort to help small businesses get capital that had become difficult for them to attain. The loan program provides money to smaller banks – their assets must be under $10 billion – and charges them lower interest rates if the money is used for loans to small businesses.
More than 500 small banks have applied for the loan program, according to Treasury figures. Massad said less than $10 billion will ultimately be repaid to the bailout from the loan program.
Paul Merski, chief economist for the trade group Independent Community Bankers of America, said there was a lot of interest among small banks in using the loan program to repay any bailout debts.
The bailout’s wide unpopularity left it with a “stigma” that many bankers are eager to escape, he said. In addition, bankers could save money by using loan program funds to both repay their bailouts and to make small business loans, thus lowering their interest rates.
“It’s almost a no-brainer,” he said.
Treasury spokeswoman Colleen Murray noted that banks using loan program money to repay their bailouts only get lower interest rates if they increase their small business lending. If they don’t boost their small business loans, they would generally pay “the same or higher dividend rate,” she said.
Massad told a House subcommittee that oversees the federal bailout that with $7.4 billion in repayments the department was receiving on Wednesday, Treasury has now received $251 billion back from banks – surpassing the $245 billion in bailout funds it distributed to banks, he told a House subcommittee that oversees that program.
Ultimately, Treasury expects to earn a near $20 billion profit from the banking portion of the bailout, he said.
According to Treasury, only $411 billion out of the bailout’s $700 billion was distributed and about 70 percent of it has been repaid. The rest of the bailout money went to the insurance giant AIG, to automotive companies and to some credit and housing entities.
The Treasury Department also released a new estimate of the total cost of all the government’s bailouts, including the massive assistance provided by the Federal Reserve to support the financial system. The new estimate projects an eventual profit of $24 billion, including a projected $110 billion in income Treasury estimates the Fed will make on its investments in mortgage-backed securities and other assets.
That gain will help offset losses of $45.6 billion in housing programs, including a controversial initiative providing mortgage modifications that the House voted this week to end.
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Comments (59)
h20sue
Posted on March 31, 2011 at 11:36amAs a small woman in business, it’s been a day to day struggle since 2008 to keep my door open. This is a great disappointment as I’ve had to try to stay in business using credit cards, savings, etc. and the banks are not interested in helping. I believe our president is as much to blame for the bailouts to the banks as anyone. He should have known what the selfish SOB’s were going to do.
I firmly believe our president wants not just small businesses to fail, but the entire USA. He’s doing a bang up job making certain it happens.
If he wants us to succeed, he needs to start gathering illegals and sending the back to their mother lands. He needs to lower tax rates so businesses can return to the USA as high taxes is why they left in the first place. Had nothing to do with paying higher rates. We are an over taxed country.
I’m living a nightmare and small businesses should be equipped with funding to expand so we can hire and increase our revenues. Trust me, it’s not going to happen until our government structure is changed. Maybe we need to get rid of ‘professional politicians’ and start fresh as they are allow our president to get away with murder. Anyone ever heard of impeachment?
Report Post »Revere2
Posted on March 31, 2011 at 10:40amThe BEAT goes on!!
Report Post »Wilkins
Posted on March 31, 2011 at 8:31amI’ve loved that name, “Troubled Asset Relief Program”, ever since it was announced:
Report Post »“Hey, maybe we can throw a great big TARP over this steaming pile, so it’ll seem less offensive.”
Wilkins
Posted on March 31, 2011 at 8:31amOne problem getting TARP money into small business loans was that loans officers want to lend to smart business people. Smart business people didn’t wanted to expand operations because of the uncertain business climate created by other Democrat programs / policies.
Luckily for those looking to distrubute TARP, AIG, GM, Chrysler etc. needed bucks to rescue their failed business models. So as usual, government diverts money from taxpayers (present and future) to invest in failure. The National SNAFU Administration, with direction from the FUBAR czar.
Report Post »Apple Bite
Posted on March 31, 2011 at 5:34amGood grief, this is like taking money from the pot to pay the people that gave money to the pot. So how is that helping? The only ones that won’t get this are brain locked Liberals.
Report Post »Jaycen
Posted on March 31, 2011 at 3:10amHEY….FREAKING HEY.
If you‘re complaining that the banks ARE PAYING BACK OUR TAX DOLLARS WHEN WE’RE FACING MASSIVE FEDERAL DEBT, shut the hell up.
The bank wants to pay back stimulous dollars they received from US, instead of spending it. Do you understand? The bank presidents clearly do. They should since they’re bankers. Do you think bankers get rich by making stupid business decisions. They’re trying to tell us “take your money back, stop wasting it this way, invest your own money and spend your own money”.
DUH.
Report Post »Jaycen
Posted on March 31, 2011 at 3:12amGod. Conservatives are so wound up and looking to complain about something. Think out what you’re complaining about. I know most Blazers are Tea Party Conservatives. That‘s why I’m here.
Think the message through. That‘s all I’m asking. Don’t give into your natural tendancy to be jealous of “rich, fatcat Capitalists”.
Oh yeah….when you put it that way, I’m turning on my own. Doh!
Report Post »jim
Posted on March 31, 2011 at 12:53amIs anyone actually in charge of this corrupt system?
Report Post »colonial10
Posted on March 30, 2011 at 10:11pmIts kind of hard to have faith in our government when it comes to finances. It is completely idiotic to say that there is a surplus anywhere when the results are the facts. They can manipulate all they want. They can’t hide their mistakes with gimmicks anymore. The Democrats will be ousted and the Republicans given one more chance. If they continue to deceive us, they will be out as well. The best mechanics of our Constitution is our voting system if not corrupted. Peaceful and non violent. The right way.
Report Post »MightyMouth
Posted on March 30, 2011 at 10:03pmThe poor dumb bast@rds who work and pay taxes take it up the keister again. What else is new?
Report Post »RightPolitically
Posted on March 30, 2011 at 9:39pmThe corruption begins and end with career politicians on both sides of the aisle who played the game as if there could never be consequences for the flim-flam.
Report Post »temple62
Posted on March 30, 2011 at 7:57pmThis Congress and administration simply did not get the message from those extreme Tea Party people who told you, “You in debt, stop the spending”! Yes, and they scared Nancy Pelosi with the sign that said, “Read the damn Bills before Signing” – how thoughtless and extreme we are (LOL)!
Report Post »psycodad36
Posted on March 30, 2011 at 10:33pmcoin a frase. Instreamist.(copyright I own it but will allow only you to use it without payment ,unless your selling it)
Report Post »psycodad36
Posted on March 30, 2011 at 7:51pmso it’s basically like taking out a loan from your bank.then taking out another loan to pay it off, then making your nieghbor pay the bill,if you get one?sounds of typical DC burocracy.
Report Post »WHITE LOTUS2x
Posted on March 30, 2011 at 7:51pmI`m not sure but does that mean they are borrowing from the gov. to pay on there loan from the gov? I dont think the bank, any bank, would buy that idea. They would be chaseing their tale and I would be driving around in a new car with little or nothing out of my pocket. I guess it would be a, cash for bankers deal like cash for clunkers. Ten billion? I will read it again, i must have read it wrong, this doesnt even make sence. Let them go out of buisness, get a taste of what the economicaly stricken are dealing with right now. If I wanted moneyI wouldnt go to a small bank anyway. Well thanks to Fox and Glenn or no one would know anything, just be going along whistleing to myself like I had good sence.
Report Post »Living In NYC
Posted on March 30, 2011 at 7:47pmWell dah….20% unemployment – under-employment, almost 5% of homes in foreclosure and almost 15% of home are vacant all in the United States……gee TARP was a great idea!…Thanks Barry!
Report Post »Its Gonna Getcha
Posted on March 30, 2011 at 7:23pmIt‘s Beck’s fishbowl analysis all over again. Jimmy Geez.
Report Post »MeteoricLimbo
Posted on March 30, 2011 at 7:17pmbounce a check to pay off a bounced check..alrighty then
Report Post »hempstead1944
Posted on March 30, 2011 at 7:09pmPretty slick……everytime you think the crooks have run out of ways to scam the public……they think up another….gotta give them credit…..
Report Post »hauschild
Posted on March 30, 2011 at 7:08pmLeverage: You just can’t beat it.
Report Post »starman70
Posted on March 30, 2011 at 7:05pmOK, let them give the money back WITH INTEREST . After all, it was never used as the government intended because no one who owned a small business wanted to expand in the shaky financial climate created by this administration. Not only would they have to pay back the money with interest, they would have to pay a significantly higher tax rate as their business prospered. Add to this the higher unemployment taxes federally mandated and imposed by the states, also add in the cost of the Obamacare debacle which a small business could not “OPT OUT OF” and you have the receipe for stagnancy in the business community. No wonder were going nowhere.
Report Post »dcwu
Posted on March 30, 2011 at 6:51pmLet’s see now.
Report Post »A lends B money.
A month goes by.
B can’t pay.
So A lends B more money.
Then B makes a payment to A.
That’s bumping your credit limit and tapping your card to get money to make your payment.
Guess what happens next month.
swigs
Posted on March 30, 2011 at 7:03pmThere’s one item missing from equation, allow me to interject;
B screws up and asks A for a bail out. A takes money from C and gives it to B.
B screws up again and asks A for more, A takes more from C.
B takes some of what A gave them and gives it back to A.
A keeps it and tells C, B is profitable again.
Guess who C is?…..answer……The tax paying chumps.
Report Post »pajamash
Posted on March 30, 2011 at 7:06pmAmen swigs….Amen!!!!
Report Post »starman70
Posted on March 30, 2011 at 7:11pm@ SWIGS
And they put Bernie Madoff in jail?
Report Post »swigs
Posted on March 30, 2011 at 7:21pmBernie should’ve got a medal. He could’ve stayed in business and no one would have been the wiser. The Feds pulled the plug on him for petty reasons. Mainly they don’t like it when someone can pull a better scam then they ever could.
Report Post »pajamash
Posted on March 30, 2011 at 6:49pmNow if one of us did this it would called “double-dipping” and I believe that is a Federal Offense!
Report Post »quicker
Posted on March 30, 2011 at 6:41pm@ Showtime ;Did you get your lottery ticket yesterday .That many 1st post WOW
Report Post »EqualJustice
Posted on March 30, 2011 at 6:36pmSmall businesses don’t have a PRAYER of succeeding. With all the new federal regulations, federal AND state taxes and fees, increases in workman’s comp, business mandates, application fees, annual business fees, even the TERRORIST RISK ACT is still hurting them on any insurance that is mandated. Good luck making a buck, never mind HIRING people. Not worth it any longer. Socialists are happy though!
Report Post »Showtime
Posted on March 30, 2011 at 6:29pmI wish that kid on Glenn Beck’s show could run the money in this country. He’s the only one smart enough to understand their thuggery!
Report Post »starman70
Posted on March 30, 2011 at 6:53pmYou’ve GOT to be kidding! There is no one alive who could ever decipher the tangled web of “Finances” created by Washington. Even if you treated Washington’s finances as the “GORDIAN KNOT” and hacked them in two, untangling the halfs would still be impossible.
This brilliant kid understands higher mathmatics and astro physics – - – - not subtrefuge, slight of hand, beaurocracy and plain out thuggery.
Report Post »swigs
Posted on March 30, 2011 at 6:54pmThat smart kid really impressed me. If I were rich and famous instead of asking Oprah style questions I would’ve asked him about “zero point” energy (energy from a vaccum), time travel, worm holes ect ect.
He did say he wants to write math text books, maybe Fox could give him his own science show :).
Report Post »chickenlittle
Posted on March 30, 2011 at 7:00pm@ Starman70… It’s not really all that hard to understand. All you have to do is realize if the feds came up with it, it’s a “federal offense.” The rest is just fine print boilerplate.
Report Post »AzDebi
Posted on March 30, 2011 at 7:02pm@swigs:
“That smart kid really impressed me. If I were rich and famous instead of asking Oprah style questions I would’ve asked him about “zero point” energy (energy from a vaccum), time travel, worm holes ect ect.
He did say he wants to write math text books, maybe Fox could give him his own science show :).”
Report Post »________________-
I‘m sure we haven’t seen the last of him…amazing, huh? Great idea about the science show…not sure we’d understand it though…
Anti_Spock
Posted on March 30, 2011 at 6:26pmWhat a deal this is. It would be like me going to the bank and using their money to pay off my bank loan. (Isn’t that called robbery??????)
Report Post »chickenlittle
Posted on March 30, 2011 at 6:38pmNah… not robbery… like paying your credit card bill with your credit card. The Feds do it all the time… standard practice, don’tcha know?
Report Post »cheezwhiz
Posted on March 30, 2011 at 6:39pmThe banks refinanced their bailout ?
Report Post »And the taxpayers paid for the bailout AS WELL AS the refi ?
Nice trick ..can I do that too ??
chirodoc007
Posted on March 30, 2011 at 6:43pmThis is exactly what GM did. They paid off their “Loans” with the money that they got when the feds bailed the out with TARP funds in exchange for $2.1 Billion in preferred stock and 61% of their common stock.
It happens all the time with these guys.
Report Post »chickenlittle
Posted on March 30, 2011 at 6:48pm@Cheez… Sure you can do it… Just buy a golf cart or a government motors Volt car. Weatherstripping anyone? Other than that… off to jail with you. Tell Bernie we said “Hi!”
Report Post »AzDebi
Posted on March 30, 2011 at 6:50pmOFF TOPIC (AGAIN…but Last one…I promise)
Dutch Harbor ,AK (Alaska) Highest radiation readings in the country.
Report Post »They just put the tickers in recently. But the big thing is that this is a major fishing port. Not just crab, but salmon, black cod, pollack(fake crab). Just search Dutch Harbor radiation and you’ll find it.
Good thing is that seasonal crab fishing in these parts is done until fall.
thepatriotdave
Posted on March 30, 2011 at 6:59pmYou and I can’t get away with doing this, so why should the Government, Fed, or the Banks?
C’mon people, this is a no-brainer. The Govmnt is bugging you to pay back the money you got from the Govmnt. So the Govmnt comes up with a great plan… they tell the Banks that the Govmnt will get the Fed to loan them the money so they can pay back the Govmnt the money they got from the Fed. So now that you have paid back the money you owe the Govmnt, you now owe the Govmnt the same ammount that you did before this great deal was cooked-up. Now that’s a government to be proud of. If you are an idiot!
http://www.AmericasTeaPartyNews.com
Report Post »VegasGuy
Posted on March 30, 2011 at 7:07pmIt is time to end the Federal Reserve and take ALL banks down a notch or two. They are nothing but a bunch of thieves that have bought and paid for the laws that protect them from being prosecuted for their thieving ways.
Report Post »TXPilot
Posted on March 30, 2011 at 7:49pmWish I could just go out and waste my money, then print up more in the basement to pay off my bills.
Report Post »BetterDays
Posted on March 30, 2011 at 8:45pmWhen I was in the Navy we had an acronym…BOHICA! Bend over here it comes again!
Report Post »GODSAMERICA
Posted on March 30, 2011 at 8:49pmWhat does anyone expect. Crooks paying stolen money to pay off debts incurred with stolen money. The government stole our money, gave it to the banks and now the banks are paying that off with stolen money. The bad thing is that we will never see our money again. They talk about the bailouts using our money but when it gets paid back the government keeps our money and spends it again on something else, usually something personal for the select few.
Report Post »watchtheotherhand
Posted on March 30, 2011 at 10:05pmThere is some sick, illegal, incestuous, slimy under the table back room deals between big money bankers and politicians that would make any mobster proud. You can take that to the bank !!!!!!!!!!!!!!!!!!!!!!
Report Post »Stoic one
Posted on March 30, 2011 at 10:40pmI think a more correct term would be embezzlement
Report Post »Anti_Spock
Posted on March 30, 2011 at 11:15pmCHICKENLITTLE…. Huge difference. Unless you have a credit card that is funded by the taxpayer.
Report Post »1TrueOne55
Posted on March 30, 2011 at 11:36pmJust like Social Security was never planned to payout past 1980…
Report Post »Leadthemtothelight
Posted on March 31, 2011 at 12:01amThank you big banks, we the people of the usa are sure glad we could save your ass so you could turn around and screw us again. The village idiots in Washington perhaps need to be a tad more careful with our tax dollars.
Report Post »MYTXTREGISTER.COM
Posted on March 31, 2011 at 9:17amUnfortunately this is another example of organizations that are given tax payer money and not held accountable, when will we learn – fool me once…
Report Post »Help our country get its financial house in order by starting with your house http://MytxtRegister.com
Beckofile
Posted on March 31, 2011 at 2:19pmBanks use cotton coupons to pay for cotton coupons and the people believe this is not a ponzi fascist example of corruption?
Report Post »jackrorabbit
Posted on April 1, 2011 at 12:49amSo they take the money that they owe at higher interest and swap it for new loans at near zero. Can I do this with my mortgage? If not, then someone should be going to jail.
Report Post »