Fascinating op-ed in NYT
today that points out something I had not been aware of - the TARP money went to bank holding companies, not the bank subsidiaries themselves, which seems like an enormous benefit to shareholders and incumbent management but not at all a way to assure capital adequacy in the actual banks. Highlights:
While TARP has been generous with bank holding companies, these companies have not been so generous with their banks. Four large holding companies — JP Morgan, Citigroup, Bank of America and Wells Fargo — initially received a total of $90 billion in TARP money in the fall, but by the end of 2008 they had contributed less than $15 billion in equity capital to their subsidiary banks....[This] means that when it comes time to recapitalize banks there is a bigger hole to fill, and when banks fail there is less capital available to meet the government’s obligations to insured depositors and other creditors. Keeping money at the holding company may benefit its shareholders, but it is costly for taxpayers.
If there's a credible rebuttal I'd like to hear it. Otherwise this looks like (yet) another source of justifiable outrage in the way the bank bailout has been structured to date.