Actually, Secretary Geithner, Taxpayers Still Losing on TARP

Secretary Geithner claimed this week that the taxpayers are now making money off TARP. But the Treasury analysis is ignoring some key facts. Chris Whalen explains:

First and foremost we must subtract the vast flow of subsidies that are still flowing through the income statements of banks and non-bank financial firms which participated in the government rescue program. Since 2007, the Fed has pushed the cost of funds for the banking industry down by about $100 billion annually in terms of interest expense, according to the FDIC’s Quarterly Banking Review. This includes reduced interest paid to individual savers and FDIC guaranteed debt issued by banks and the likes of General Electric.

The cost to American savers generally as well as all types of investors in non-bank financial instruments due to artificially low interest rates maintained by the Fed is a multiple of that figure annually. In other words, the cost to Americans each year in terms of transfers of wealth from individual and corporate savers to banks and large debtor corporations probably equals all the funds recovered by Treasury and the interest payments on same.

By my calculations, that puts the American people behind a couple of trillion dollars thanks to the corporate philanthropy of Tim Geithner, Hank Paulson, George Bush and Barack Obama. Indeed, so generous have Geithner and Obama been to the banks that Wall Street is already filling the Obama reelection coffers. But the real cost to the American people of the TARP bailout and related operations is a no growth economy.

Read his full analysis here.