This AM I was on CNBC discussing the banks with Paul Miller of FBR.  Paul is a first rate analysts, IMHO.

I suggested that the big banks should not be allowed to repay TARP equity to long as the government is guaranteeing their debt. That is, if a bank wants to repay TARP capital, they must end the use of debt guarantees AND be able to refinance all guaranteed debt before the TARP capital is repaid.  Link below:

We will develop this further.  Look forward to your comments.


Christopher Whalen
Managing Director
Office: 914-827-9272

Category: BP Cafe, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Should Banks That Issued Government-Covered Debt be Allowed to Repay TARP Capital??”

  1. Thatguy says:

    The more important question to my mind is, “Should TARP Banks be allowed to lobby the US Government?”
    If they are allowed to take our money and hand it over to our “representatives” in return for more of our money, what they pay back and what does and doesn’t get guaranteed doesn’t amount to $hit. I’m tired of people squabbling over the irrelevant details (arrow taxes, AIG bonuses, etc.) . I don’t care what form the theft takes (TARP, TALF, TSLF, PPIP, POMO), I just want it, ALL of it, to stop now!

  2. Hondo says:

    Not until the also refinance the government-covered debt that was issued. This should especially be the case before they can payout 50% of revenue in bonuses. They’ll still have the benefit of the Fed minipulating interest rates.

  3. Moss says:

    All or nothing. The inconceivable audacity of these firms and some talking heads to even suggest that the TARP payback signifies some sort of line in the sand is absolutely ridiculous. Since all government involvement is bad than any government involvement must be treated the same. I wish Larry Kudlow would STFU since his ideological bluster is worn out and has no credibility with anyone who really wants to understand what is happening. Banning the lobbyists would be a good idea as part of any reform legislation. The Congress should pass some sort of cease and desist order against all lobbying. Public discussion and open debate is how things should get done not payola and back room deals. Each citizen should be considered a lobbyist.

  4. johnbougearel says:

    Seems like the obvious answer is no, so the correct answer must be yes.

  5. But, Chris, “If we don’t Bail-out the ‘Banks’, our 401(k)s will implode!”

  6. mnuccio says:

    The bondholders need to take a hit here. We all know that the Lehman collapse created a panic, but that’s behind us. We should US taxpayers be expected to cover 100% of bank losses without a single dollar rom the preferred and bondholders.

    We need confidence in the system, yes but the US taxpayer should not have to take all of the risk.

  7. O, hey, just to be clear.. above, I was being Sarcastic.

    I still can’t believe how many times I’ve heard arguments, similiar to that, as excuses for the Criminal actions undertaken, throughout this whole affaire, “in our Name”..

  8. randeg says:

    I don’t think they should be allowed to do that. If that happened to us, do you think they will hand out some bailout money to us and then allow us not to pay it back? No way! In the first place, we will not even be able to get to first base and get some money for nothing.

    Evelyn Guzman (If you want to visit, just click but if it doesn’t work, copy and paste it onto your browser.) Debt Challenger

  9. Chris Whalen says:

    Implosion has occurred, sad to say. We are in the recognition phase now. Gonna talk about relativity and risk in our next spew or why the ‘V” shape recovery is really an “L.” Big implications for economy, banks, etc.

  10. dunnage says:

    All I wonder about is who gets the Gov. Backed Bonds (GBBs). Do they sell them to one another? What I would do.

  11. dunnage says:

    Ya, borrow money for nothing and pay back over 15 years; sell some government guaranteed bonds to my friends at the club.

  12. dunnage says:

    Damn bullies.

  13. bruerr says:

    All this is preceded by the idea we are in a rally (now that debt has been off loaded onto the common).

    Notice also: Now that NY bankers have passed their debt onto others, they make material changes in their accounting methods. U.S. Code, Title 12, Chapter 16, § 1831 o Prompt Corrective Action (i)(1) and (i)(2)(D) restrict the activities of any critically undercapitalized insured depository institution; and at a minimum, prohibit any such institution from doing any of the following: Making any material change in accounting methods.

    They get a taste for rally off this accounting trick and then – are in a hurry to go private again.

    That is so they can privatize their profits again:

    now that the common is shouldering their debt obligations.

    The NY banking community are so transparent. They are appearing more and more like a group of mentally ill opportunist who are salacious and careening to get rid of their debt, and then a polar extreme – desperate to privatize their gains again.

    Someone should write a song for their children to sing: Gloriously: NY bankers pass their debt onto the common and slink away from defense of capitalism, during crisis periods, when capitalism might need a defender. NY banks then want to privatize their profits. Privatize their gains during the good years. Have one bad year in the cycling of capitalism and there is Paulson as their front man, to unload their debt onto others.

    Chorus: In a hurry to offload their debt obligations, and in a hurry to be private again.

  14. bruerr says:


    Not until the song is improved and their children are required to sing it to them in recital.

    If they are going to strap their debt obligations onto our kids,
    the least they could do to sit through a recital where their kids sing about it.


  15. Brad says:

    When considering the Savings and Loan portion of U.S. history, and the scholarly study that came from review of what went wrong, I agree with the view: Once was enough.

    There was an implied promise and in some instances it was a stated promise, that Americans would not be punished, a second time, for the financial sins of bank managers and boards of directors of financial firms.

    It does seem like foul play is at work ever since Mr. Paulson had a “crisis” of leadership, and Treasury and Federal Reserve sought a partnership in trying to help large banks evade their debt obligations.

    They had to defeat and temporarily destroy laws that were meant to protect Americans. And with this, came a lot of dishonesty.

    From my perspective, it was a simple case of buyers remorse, for banks which dabbled in buddling real estate assets, and enjoyed large fees by tacking on a derivative, which was a type of insurance. This is similar to when someone becomes frozen with a classic case of buyers remorse. They have a “crisis” after a summer of living it up and having purchased fine dresses or many handbags. After many parties and lavish events, panic and then try to figure out a way to return the merchandise they purchased and have already worn.

    Is it possibly that when repaying TARP funds, we can get a written promise or pledge from Banks and also a letter of gratitude? That all their mid level and upper level executives sign?

    I have not heard one thank you to the American people from a bank officer or its subject employees-executives, in a formal sense. And with this, it is implied that a grateful bank, will take back its debt responsibility.

    This is in keeping with important rule of law, and being a responsible corporation.

    If they are healthy enough to repay TARP funds, they should also be able to put a written pledge and plan of action together, exclusively as a firm, summarizing the toxic assets they had, and what they plan to do to take those same “assets” back on their balance sheet. Not leave Americans holding the bag, a second time.

    With gratitude comes some responsibility. With the “healthy” stamp, comes full responsibility.

    There has to be better consideration for laws and rule of law, that have been the foundation of our capitalist society for decades and throughout the history of business.

    In one down cycle of good and bad years, all societies go through, the Treasury and Federal Reserve Chairman, sought to defeat laws that would otherwise have served to protect Americans from paying for debt obligations, they did not sign for.

    It would be good to hear executives of banks and boards of directors, define what capitalism means to them, and to also disclose in a pledge, what they will do in the future to preserve it, defend it, and be more respectful of our rule of law, and the people that law was intended to protect.

    Yes I am a veteran. I like to know what they have to say about defending capitalism in the future.

    This idea that you can have a “crisis” of leadership and start acting desperately to undermine rule of law, as a basis for evading debt obligations, and pushing those debts on people who have less fortune, such as an elementary school teacher or fireman and their families, this attitude that Americans are there for that purpose, has got to come to a final end.

    If banks are going to be portrayed as strong leaders, then let them stand up in defense of our great nation and the laws that have governed businesses for decades, going back to pre WWI.

    Banks officials and boards of director need to formulate an individual plan of action and sign their firms to be accountable for what will happen in the future.

    If they cannot develop a written plan for how they will take their debt obligations back, and put them in their rightful place, I do not think it is responsible to report or imply (as the Brooking Instutite does), that …”paying back TARP will be seen as a sign of strength.”

    ”…Paying back TARP money would clearly be seen as a sign of strength,” Douglas Elliott, fellow at Brookings Institute…”

    Who do they think they are kidding at the Brookings Instutitute? Paying back TARP is a sign of weakness, for what the banks are doing is trying to evade their debt obligations.

    Again, with gratitude comes some responsibility. With a “healthy” stamp of approval, comes full responsibility.