Though lots of people grumble about the government bailing out banks in the financial crisis, we have at least taken some comfort in the idea that the government has turned a profit on that bailout.<\/p>\n
Only problem is, that profit comes from taxpayer money \u2014 money that was meant to spur banks to develop communities and help small businesses. Instead they\u2019ve used it to develop and help themselves.<\/p>\n
All told, including dividend, interest and other payments, U.S. banks have repaid the government $211.5 billion under the Capital Purchase Program (CPP), the first phase of the government\u2019s Troubled Asset Relief Program (TARP), according to a report Thursday by the Government Accountability Office, a congressional watchdog. That\u2019s more than the $204.9 billion the banks initially got under TARP.<\/p>\n
$211.5 billion minus $204.9 billion equals profit, right?<\/p>\n
But 48 percent of the banks that have repaid the CPP used money they\u2019d gotten from other federal programs, according to the GAO report. Those programs include the Community Development Capital Initiative \u2014 another TARP program \u2014 and the Small Business Lending Fund, a program designed to encourage lending to small businesses. Both of those programs have more favorable borrowing terms for the banks than the original CPP.<\/p>\n
This isn\u2019t a new issue \u2014 The Wall Street Journal reported last October that banks were repaying TARP funds with cash earmarked for small-business loans, after the Independent Community Bankers of America lobbied for the ability to switch money \u201cfrom one Treasury program to the other.\u201d<\/p>\n
Small businesses have continued to struggle to get credit, a drag on the recovery, while banks have been using funds earmarked for lending to small businesses simply to pay back their first TARP bailout.<\/p>\n