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Why TARP is Insignificant

October 16, 2011

I recently discussed how TARP (the government bank bailout) didn’t help much because the banks returned the money before it was properly used. The money was rejected because it prevented the CEOs from getting big bonuses, even though the banks are still unstable. However, we must be reminded that TARP is actually not that big of a deal in the grand scheme of things. The $245 billion bank bailout given out by TARP is a fraction of the $16 trillion bail out given by the Federal Reserve–which is not technically “part of the government.” The $16 trillion bailout was not only given to corporations in the USA, but also to foreign corporations. Citigroup was the largest beneficiary and got $2.5 trillion, which is astronomically higher than the $45 billion TARP offered them.

We are told that the Federal Reserve is making money off of the loans. It supposedly made $13 billion from interest and fees from its liquidity programs between August 2007 and December 2009. However, this isn’t necessarily profit and it doesn’t tell us how much money is lost. We know that the Federal Reserve has given out low interest nonrecourse loans that don’t have to be fully paid back.

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