Saturday, April 11, 2009

The Obama administration charges juice loan interest rates

Some banks that initially received TARP (Troubled Asset Relief Program) money from Washington want to return it. That should please everyone, especially taxpayers who are fronting the money in the first place.

But the Obama administration is reluctant to allow the repayments, figuring, I guess, that they have a lot more fiddling to do with the banks.

Here's the experience that one bank had when it returned its TARP money, according to the New York Times.

Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.

“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal."

(The warrants he mentioned are the stock warrants the banks had to grant to the federal government in exchange for the loans. Now that the camel's nose is in the tent and the government has tasted the power of running the private sector, there's apparently no backing out.)


1 comment:

Anonymous said...

Why would you expand Tarp to life insurers. The deficit is going up and inflation may be just around the corner. See, for instance,
http://www.recessioninfocenter.com
It's beyond me why we are spending so much.

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