TARP Repayment Status (Part II) – Incentive Problems

Supplied Demand

It has been a while since Part I of this series last month. In this edition, I wanted to focus on the return taxpayers are getting from TARP. As the graph shows, the vast majority of large banks who took government funds have paid it back, plus interest. According to my calculations, of the $244.6 billion loaned $267.2 billion has been paid back to the government. This indicates that taxpayers have seen a 9.24% return on this investment over 5 years. While this is not an excellent return for a stock portfolio, it indicates that the program was far less of a financial burden to taxpayers than initially expected. In fact, of the 20 largest institutions, only CIT Group has failed to generate a profit for the program.

TARP Repayment Part II

To recap, we know the bailout saved the banks from going under in 2008. It worked so well, the majority have been…

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