Sunday, October 16, 2011
The problems with TARP of 2008 or the Temporary Asset Relief Program, is that we borrowed about 800B$ to pay for it. To go on top of a 400B$ Federal Budget Deficit and a 10T$ Federal Debt. And we bailed out failing banks we essentially bailed them out for their bad behavior. While the victims of their bad behavior the people who did business with their banks, remained victimized. And three years later they are still struggling from the banks bad behavior. We bailed out banks that were "too big to fail", first of all we allowed them as a country to become "too big to fail" in the first place. And then we bailed them out for their bad behavior, which is a Double Edge Sward for the country. We suffered for our governments bad behavior of letting banks become "too big to fail" in the first place. And then we suffered from these banks and their bad behavior. What we should've done instead is force these banks that are "too big to fail" breakup as a result of becoming too big. As a condition of getting their bailout money, as well as forcing these banks to come up with new Management. As another condition of receiving TARP, as well as forcing them to buy Bankruptcy Insurance. So they would never need to be bailed out again at all. Because they would have their insurance that they could go to when they are failing.
Reforms like this would've prevented banks from becoming "too big to fail" again, because now they would only represent only a rather small part of the Banking Market. Because now their would be other banks, including Community Banks. That are Private Banks but they just aren't National Banks and especially not monopoly's. Instead what's happen instead is that a lot of these banks are now back up in running. Still "too big to fail" still controlling about the same market size as they did pre TARP. Still doing a lot of the same things as they did pre TARP, like Investment Banking and holding bad assets. And looking to pickup an even larger percentage of the Banking Sector then they already have. And if they were to go down again and with this economy thats still a possibility. With all the people struggling in America an unable to pay their bills. Like their homes and business's, losing their jobs etc, that could definitely happen again. And we would be back in the same situation as we were back in late 2008. Looking for ways to save our Banking System, when you let people behave badly and them reward them for that bad behavior. Your giving them to permission to behave badly again.
The way to prevent TARP from ever happening again in the future, is not to let it happen. Force banks to breakup once they are too big and force them to sell off those assets at Market Value. And force them to pay for Bankruptcy Insurance so when they do go down again, Tax Payers wouldn't bail them out again. As well as have more Community Banks including Public Options for each State to have as much free, fair and open competition as possible.
Click on the link of the blog to see a video about TARP from Real News