Many Bailed-out Banks May Fail Anyway

The New American

Written by Charles Scaliger

Monday, 27 December 2010 14:00

As many as 98 banks, which took in a total of $4.2 billion from the Troubled Asset Relief Program (TARP), may fail anyway, according to a study of third quarter earnings by the Wall Street Journal. Although the federal government originally promised to use TARP funds only to help healthy banks, the Wall Street Journal’s study tells a rather different tale. The banks in question are hamstrung by “eroding capital levels, a pileup of bad loans and warnings from regulators,” much of them stemming from risky commercial real estate loans gone sour. Also significant is that most of the banks on the list are small, averaging $439 million in assets. The Wall Street mega-banks are once again flush with cash — but then, many of those privileged institutions, numbered among the Federal Reserve’s “primary dealers” with whom open market operations are conducted, have had direct access to Federal Reserve funds via the Fed’s new Primary Dealer Credit Facility and Term Securities Lending Facility. Goldman-Sachs, for instance, a primary dealer that has made enormous profits during the financial crisis, had more than $75 billion by the end of the third quarter and has paid back all its government loans.

Written by Charles Scaliger

Monday, 27 December 2010 14:00

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