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Nov 26, 2011

Wall Street Was Not Bailed Out

Occupy:  The bailouts prove Wall Street bribed our government.
Mike:  Wall Street received TARP loans and have paid them back.

Occupy:  So who was bailed out?
Mike:  Hundreds of small banks in every congressional district.

Occupy:  Small banks own the government?
Mike:  In a way. Small banks give political contributions to congressmen. And, hundreds of small bank failures would point blame at government's disastrous housing policies.

Occupy:  Occupy Main Street!
Mike:  Not quite. Try "Occupy Government".

Wall Street Was Not Bailed Out

11/26/11 - Power Line by John Hinderaker

[edited]  In what sense were “Wall Street banks” bailed out? They weren’t in fact “given” any of our money. Most of the largest banks (which were perfectly healthy) were forced to take TARP loans so that there would be no stigma attached to the few large unhealthy banks, and the many unhealthy small community and regional banks which were saved by those loans.

Almost all large “Wall Street banks” have repaid their TARP loans with interest and in short order. Three-quarters of TARP went to hundreds of small regional banks, notoriously unstable, particularly from commercial real estate lending. It is exactly those small banks who who remain “bailed out”, who lent recklessly to the real estate developers who built the bubble housing.

Taxpayers will end up paying for the government policies which directed money into housing and to automobile worker's unions. Wall Street made 3% commissions. The rest of the bailouts have gone to Main Street, the 99%.


Josh said...

Hang on a tick. 'Repaid', you say. But with whose money? We slipped them more money than we bailed them out with, through the back door of the discount window. If you had a seat at the table, you could buy bonds at a discount, and then cross the street and re-sell them back to the government for a profit. How much in bonds passed through this way, hasn't it been over $1trillion?

Possibly some of the bigger banks didn't need the bailout. But those which did, are also those which were handed the most additional capital in the *aftermath* of the bailout. The primary players had access to free cash that the smaller banks did not. So it's disingenuous to say the big banks paid up and the small banks didn't. The big banks repaid the bailout loan, with money we GAVE them (i.e. outright, not a loan).

Andrew_M_Garland said...

To Josh,

The issue in the PowerLine post is: what was the "bailout" and who received it. Hinderaker comments on TARP.

If you are defining the "bailout" differently, then a link to your information source would be interesting. Also, support for the idea that the government gave the banks quiet loans in the background to pay off the public loans of TARP.

There are other Federal Reserve policies which favor banks which precede and follow the crisis in housing bonds. I don't like those policies, but they are not usually called "the bailout".

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