Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at intelligent and rational individuals, whose comments are very welcome.

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"Observe that the 'haves' are those who have freedom, and that it is freedom that the 'have-nots' have not." Ayn Rand

"The virtue involved in helping those one loves is not 'selflessness' or 'sacrifice', but integrity." Ayn Rand

06 April 2009

Why did banks take TARP money?

Many healthy banks have reported that they were forced to take TARP money even though they did not need it. Today, Judge Andrew Napolitano, said on FOX News that the chief executive of a $250 billion asset bank told him that his bank was threatened with 5 consecutive years of tax audits by the IRS if the bank did not take the TARP money (bank bailout money) that it did not want to take. The Secretary of the Treasury, who did not pay his own taxes, is apparently very comfortable in using the power of the IRS to make others miserable to further the cause of fascist socialism. If the government would use this fascist tactic, it would undoubtedly be likely to use other tactics equally reprehensible to force banks to take TARP money they did not need and did not want. The banks are heavily regulated, which undoubtedly gives the Federal government a huge degree of power over them.

This may explain why the very free market oriented BB&T Bank, whose Chairman John Allison requires high-level bank executives to read Atlas Shrugged and donates money to colleges which introduce Ayn Rand's works into the curriculum, disappointed many of us by taking TARP money. Earlier reports that bankers were forced into a room in Washington and told that they would not be allowed to leave until they accepted the TARP money were apparently not exaggerations. As we now know, those banks who were force-fed TARP money are now under either the direct control of the Federal government or being threatened with it if their policies do not comply with the Federal government wishes. The latter state is little different from the former. If you must do something because someone is holding a gun to your head, then you clearly have no real control and you are nothing but a slave.

Many bankers do not wish to be slaves. Many banks are offering to pay back the government the money given them with interest. The government is refusing to allow the larger banks to do this, though they have taken some payoffs from the smaller banks given money. Why are they refusing to allow banks to pay off their loans? Why did they force them to take the money in the first place? The answer is clear. This money loan was a pretext to gain control of the banks and the Federal government does not want to relinquish that control. Fascism is both tempting and addictive to the kind of politicians who seek to control our government. Government is then used as the tool to gain control not just of banks and auto companies, but of each and every one of us individuals. Of course, they offer various social program bribes to individuals under the same principle as the TARP loans as a means to gain control of us individually.

Governments in the United States have long been trekking down the road to fascist socialism, but the pace of the forced march has picked up markedly since Obama has been united with the Democrat-controlled Congress. We individual Americans have been like frogs placed in a very deep pot on the stove and the heat has been turned up gradually until recently. This has kept us sluggish and pacified. We are now being put to the boil. When the boiling is done, we are all to be one intermixed, indifferentiable mush. The socialist ideal of equality in total poverty will have been accomplished. Unless we strive most mightily to jump out of this deep pot of water immediately.


Peter Vaihansky said...

Thank you for the post. I am putting your blog in my favorites.

I am trying to stop rewarding "TARPed" banks with my money and to take my business somewhere else. Do you have any advice? Is there a comprehensive list of banks that took TARP money?

Disappointing to hear about BB&T - they hold my mortgage

Charles R. Anderson, Ph.D. said...

Hi Peter,

I am glad to hear that you are finding value in my posts.

I suspect there were banks who wanted the TARP money, but the post above seems to make it clear that some did not want it. Some banks were forced to take the money. Most of the money was then put into the reserves the government requires banks to maintain. The government has great leverage over the banks due to the heavy government regulations over them and the many benefits the government gives banks, such as the FDIC.

You and I pay taxes and much of the money we pay is used for bad purposes by the government. Does that make us bad? No, we are bad only if we voted for those who are most enthusiastic in Congress or the office of the presidency for doing the bad deeds.

We should not forget that the banks had to allow the government to take preferred stock at the very low prices in the panic period and that they have to pay the TARP money back with interest. The banks that have paid back their TARP money should be given credit for doing so. Those banks that I know of that have paid back the TARP money with interest are:

BB&T $3.1 billion
Morgan Stanley $10 billion
J.P. Morgan Chase $10 billion
US Bancorp $6.6 billion
Goldman Sachs $10 billion
American Express $3.39 billion
Bank of New York Mellon $3 billion
Capital One Financial $3.57 billion
State Street $2 billion
Northern Trust $1.58 billion
Signature Bank $120 million
Old National Bancorp of Indiana $100 million
Iberia Bank of Louisiana $90 million
Bank of Marin Bank of Novato, CA $28 million

We do not know what pressures were brought to bear on BB&T and in view of their unusually good ethical record prior to the TARP, I am inclined to believe it would be unfair to assume that they wanted to take advantage of the taxpayer. BB&T did pay the taxpayers a dividend on the preferred stock held by the government of $92.7 million as well as pay back the TARP money with interest. They will likely also buy back the preferred stock shares at the presently higher market value as well.

If all of the banks manage to do what BB&T has done, then the TARP will not have been a bad thing for the taxpayer. Of course, some banks will not pay the money back, some having gone bankrupt already. Others may pay back TARP money, but pay little to no dividends on the preferred stock held by the government and their stock will not appreciate much, so the taxpayer will not have a return when the bank buys back the stock. We ought to give some credit to the banks that pay back the hard-hit taxpayer with the interest, dividends, and well-appreciated stock repurchases.

Bank of America may be a special case. They were forced by the government to buy Merrill Lynch for about $35 billion more than it was worth. Perhaps it should be held blameless for not yet repaying the TARP money.

Charles R. Anderson, Ph.D. said...

I just discovered that Catastrophe by Dick Morris and Eileen McGann has an appendix with a complete list of the TARP recipients as of 11 March 2009. It lists 495 banks and other financial institutions.

Chris said...

I found your blog while looking for information about how some TARP money was essentially "forced" upon employers. This is a topic not often reported by the financial talking heads because it encourages skepticism with the other companies.

I disturbingly and sadly see TARP as as parenting on a much larger level than just the individual. If your parents are say paying for college or your for a car than they have every right so tell monitor your grades and what car to buy. In this crises it is quite easy to get government's hand involved but another to get it out.

Thank you for the posts. I really appreciate the time, thought, and research you have put into this blog. I plan on checking it out regularly.

Charles R. Anderson, Ph.D. said...

Welcome Chris and thank you for your kind remarks.

Basically, the federal government wanted to force many healthy banks to take TARP money along with those which were in true trouble. That way, the fact that a bank took TARP money was not a clear sign they were in trouble. Basically, the government was hiding information from the People.

In addition, this meant that the profit the government could expect to make in interest, dividends, and the appreciation of the undervalued stock of the healthy banks would offset the losses with the unhealthy banks that failed or at least could not give the government a profit. In effect, the healthy banks were forced to subsidize the unhealthy banks! They were given a very rotten deal.

Now, Obama is trying to use the fact that they were given TARP money to dictate the salaries of top executives and to justify more direct taxes on banks. This is all truly about sucking the blood out of the responsible banks to the greatest extent possible. But Obama plays this as populism and counts on the re-directing the anger of the people at all the banks, not just the irresponsible ones.