Liesman: No TARP Repayment Announcements 'Til After June 8


Which is clearly disappointing to those in the group (Blankfein) hoping to get the go-ahead this week so they could really let loose over the long weekend but what can you do. Steve Liesman reports that supervisors having discussions with several banks (GS, JPM, MS) on the matter of repaying the very much strings-attached TARP funds have requested "supplemental info" on which recommendations to the Treasury will be made. Besides proving that at least one member of the board can make an entire meal out of one ingredient (don't know why that has bearing on how they'll fare out in the wilds of the market but apparently it does), Steve-O says evidence must be produced that the firms can issue unguaranteed debt, self-fund in the market, and, wait for it, pass the stress test without the taxpayer money (BAC, hearing this last one, steps out of the line formed outside the building).


TARP Charts!

The Federal Reserve has this new paper out about TARP that does a bit of highly suggestive eyebrow raising about some banks that shall remain nameless. They start from the awkward fact that TARP wanted everything in one bag but didn't want the bag to be heavy, or as they put it: The conflicted nature of the TARP objectives reflects the tension between different approaches to the financial crisis. While recapitalization was directed at returning banks to a position of financial stability, these banks were also expected to provide macro-stabilization by converting their new cash into risky loans. TARP was a use of public tax-payer funds and some public opinion argued that the funds should be used to make loans, so that the benefit of the funds would be passed through directly to consumers and businesses. So you might reasonably ask: were TARP funds locked in the vault to return the recipient banks to financial health, or blown on loans to risky ventures, or other? Well, here is Figure 1 (aggregate commercial and industrial loans from commercial banks in the U.S.): So ... not loaned then. But that's not important! The authors are actually looking not primarily at aggregate amounts of loans but at riskiness of loans and here's what they get: