The risks of returning the Tarp

The risks of returning the TARP June 11, 2009 Why are so interested U.S. banks helped by the U.S. government in giving back? Why does not interest the U.S. Treasury that they do so? Banks pressed, and the Department of Treasury Timothy Geithner at the helm, did not have many alternatives. The Treasury Department has authorized ten of the largest banks in the country to return a U.S. $ 68,000 million in federal bailout made it so only eight months ago. ------- ------- *** LATINFORME Special Advancement Where is China investing your money now? In a strategic alliance with a South American company that will report to both strong advantages in the short, medium and long term. What is that company? You reveal it soon. Watch for the next advances in LATINFORME DAILY, detailing the upcoming launch of the report offer that announce the name of this company and others who will benefit from the Asian giant. But Chinese are not promises or Argentina. This partnership is already underway and the company has found just what was needed to boost its production sharply.

We must invest in this company and before the news ---------------------- .*** widely known is that these entities do not return the money respect to taxpayers who ultimately are the ones who have contributed. The rescue was the cost to banks (including the cost of being marked for the help it). Cost too much and did not represent a business for them. Although at the time, these funds were of great help, and that is why the bodies were in a good way, this aid imposed a series of limitations that did not like such as limitations on the compensation mechanisms bank executives (which makes it difficult to maintain the talents), the hiring of foreign employees and limits on certain expenses. As we have been talking about for several days, markets are seeing the end of the financial crisis and not a few strategic moves we are looking to achieve fully exploit the benefits of recovery and repositioned in the market.

The U.S. $ 68,000 million is a portion of the total assistance provided to the sector by the government in the framework of the Troubled Asset Relief (TARP for its acronym in English). According to Europa Press, more than 600 U.S. banks participated in the program, receiving U.S. government $ 199,000 million. Worth mentioning here that 22 of the smaller institutions have already repaid funds received at the time, although this has not been released. Banks seek to get rid as soon as this "life preserver? at the same time becomes an obstacle to seize the opportunities that economic recovery offers. Francesco Guerrera and Greg Farrell made an interesting analysis in which pose Reporter: "In regard to government help, to be among the banks that do not have this support, a group that includes JPMorgan Chase (NYSE: JPM ), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) - represent a significant advantage in relation to entities that are holding these funds, including Citigroup (NYSE: C) and Bank of America (NYSE: BAC) ?. If you wanted the banks with this move was a recognition of the market, that was not what they accomplished.

Yesterday Goldman Sachs shares lost 1.76%, those of JPMorgan Chase, lost 1.19% and Morgan Stanley fell 1.72%, all reaching their lowest level in a week. It seems that the first reaction of the market is punishing these entities by taking an unnecessary risk which limits their ability to grow in the immediate. The question to be us here is whether this difference is positive or not. Regulators generally make their greatest efforts to making visible the difference between good and bad entities. This encourages the not so good to strive for improvement. However, in this case there seems to be this kind of differentiation that is intended, a desired result. There a dangerous distinction between entities is something that is not pleasing to the government and that is why at first wanted to avoid. The government knows that there is the additional risk of adversely affecting institutions holding government assistance. The market could interpret the status of these entities involves additional problems that prevent them from releasing action imitate the look of the Treasury controller.

Probably the alleged discrimination between "good institutions? and "non so good?, which derive from the early repayment would not be the only negative element would be. When even the U.S. economy is in crisis, banks (largely responsible for it), are still affected, and do not observe sufficient strength. The decision made is rather a risky decision entities are encouraged to take. Surely I will say that taking risks is at the core banking business, although at times this could lead to a crisis situation if the economic picture worsens, it would undermine what remains of prestige. For Kevin Petrasic, an attorney at law firm Paul Hastings: "Returning TARP funds is a major competitive advantage. The market will take into account the difference between those who pay and those who do not pay, and the latter will be considered an obligation of gratitude to the government?. My thoughts, as I said earlier is that the problem that may arise is linked to the market can further punish entities who have not taken the decision (or are not allowed), early return of aid, putting in serious trouble (greater than they already have) increasing the risk of dropping them, but also too systemic risk.

Barack Obama, but applauded the decision of these entities, below sent a warning message: "This is not a sign that our troubles are over, we are far from that?. Obama is concerned about the freedom to achieve these entities and that is why, according to The Economist, Mexico, plans to launch next week a new model of financial regulation in order to curb excessive risk taking on Wall Street. This decision to return early, not only fell bad for the U.S. government, but also some bags interpreted this limit lending by these entities to have fewer funds available. Probably this is not the plan operated by these entities any time soon expect the market to reward and grant them sufficient funds to expand its business and its volume of intermediation, to thereby recover the market share resigned during the crisis. Beyond the objective pursued by the banks, the early repayment of government assistance has not been taken in a good way and has even contributed to the uncertainty of context, at least in the short term, given the fragility suspicions thereof.

Would he have allowed the U.S. Treasury haberles this return?