We continue to be amazed at the hatred towards banks after the financial crisis. The Troubled Asset Relief Program (TARP) that was coordinated by the Treasury and Federal Reserve has proven in our mind to be unwarranted. The US Department of Treasury released its latest cost estimates of TARP and the likely outcome is a positive financial return for taxpayers in terms of direct fiscal cost.
We wanted to review the banking industry three years after the financial crisis:
- Treasury continues to wind down the investment in the remaining 430 banks that have not repaid their TARP, but the gains stand at $19 Billion and counting. TARP’s bank investment program helped stabilize the financial system by providing capital to more than 700 banks (more than 450 were small, community banks).
- Banks have added nearly $400 Billion in fresh capital as a cushion against unexpected losses and financial shocks. Banks have also reduced their reliance on short-term funding, which is what disappeared during the panic.
- The United States has the least concentrated banking system of any major economy and the smallest banking system relative to the size our our economy.
The Treasury and Federal Reserve should be getting accolades for a job well done, but we bet the media will never tell the story correctly. Hopefully textbooks (guess they won’t exist.. but their next generation counterpart) will tell a different story to the next generation.
Stay tuned as we touch on the job our politicians have done later in the week. Don’t think they make the grade, and is our biggest worry going into the summer.