Banks Can't Repay TARP Loans
Small banks by the hundreds don't have the money to repay federal bailout loans, according to a report due out Wednesday. Although the government chants that the financial rescue is a success, Christy Romero, a special inspector general for the Troubled Asset Relief Program, says that 351 small banks owe around $15 billion in outstanding TARP loans. Moreover, they have almost no ability to raise new funds to repay the government.
These smaller banks have generally less than $1 billion in assets. Most of these banks are not widely known. Local business owners and prominent families are their investors and customers.
The Department of Treasury said in a report last week, “Overall, the government is now expected to at least break even on its financial stability programs and may realize a positive return.”
However, Ms. Romero says that taxpayers are still owed $118 billion from investments in AIG, GM, Ally Financial and other small programs under the TARP programs. She has criticized the Treasury for lacking a plan to wind-down the small banks from the TARP program and those banks that can't repay the TARP loans.
According to Representative Scott Garrett a Republican from New Jersey, these small banks are likely on their own and shouldn't expect help from Washington. “It was was not thought through as to how it would be implemented … it was not thought through how they're going to extricate themselves.”