Yesterday, the Treasury Department announced that 10 financial institutions had been cleared to return their TARP bailout money — totalling some $68 billion to the government. This is good news — taxpayers are finally getting some of their money back, and banks look to regain their independence, putting the threat of Detroit-like nationalization behind them.
Still, not everyone is happy. There’s been quite a bit of hand-wringing over whether these institutions really are healthy enough to return their money. But — while no one is saying the financial system is back up to 100 percent — each has not only passed the stress tests administered by the Fed, but in many cases have (with relative ease) raised capital on their own. They’ve done everything the regulatory wizards have asked of them but retrieve the broomstick of the Wicked Witch of the West. Unless we want to keep the financial sector in a permanent state of government dependency, repayment must be allowed –and in fact encouraged.
Disturbingly, a growing chorus of voices are actually arguing that repayment must be prevented — not for the health of the banks — but so as to preserve that government dependency, or rather the government controls that come with it. On PBS’s NewsHour with Jim Lehrer last night, for instance, author William Cohan made the case in startlingly frank terms, arguing that:
“Letting these banks get out of the TARP and slither away from the grasp of the government at just the moment when we need to restructure the banking system is not wise.”
Not much ambiguity there — no lip service to free enterprise or pretense that government control is a last resort. Instead of being a by-product of bailout, government control is the reason for it. And banks must not be allowed to escape the grasp of those controls.
This is dangerous. All the more reason banks must be allowed to leave the TARP trap — by slithering or other means — as soon as possible.
