Taxpayers are still bailing out Wall Street, eight years later

Washington Post ^ | 07 November 2016 | Renae Merle

[Lorianne]

Eight-years after taxpayers rescued the U.S. financial system, some of the country's largest banks, including JPMorgan Chase and Wells Fargo, continue to receive billions in bailout money, according to government data.

Wells Fargo is eligible for up to $1.5 billion in bailout funds over the next seven years. JPMorgan and Bank of America could receive $1.1 billion and $964 million respectively.

The continuous flow of funds is a remnant of the $700 billion bailout effort, known as the Troubled Asset Relief Program or TARP, put in place during the financial crisis. Some of that money, about $28 billion, was carved out to help distressed homeowners by paying banks to lower their interest rates and monthly payments.

The program, the Home Affordable Modification Program, has undergone several revamps over the last few years and fallen short of helping the 3 million to 4 million homeowners the Obama administration initially hoped. But it continues to operate -- HAMP will accept its last homeowner application at the end of this year -- and big banks continue to be paid based on how many homeowners they help.

At least the money being paid to the banks is making it more likely that homeowners will qualify for help with their mortgages, said Alys Cohen, staff attorney for National Consumer Law Center. “To some extent, companies are being paid for what they should have been doing anyway,” said Cohen.

But the stream of cash for the big banks is worrisome to Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, the chief watchdog of the financial crisis-era bailouts. Many of the banks have repeatedly broken the rules of the program, including kicking homeowners out unfairly or making it too difficult to apply for the help.

[Toddsterpatriot]

The crisis was caused by a government driven bubble created when banks were told to make (eventually they did it enthusiastically) to make questionable loans. They originated the loans and then dumped them into the GSE’s who packaged them as security instruments that were given high ratings. The rating agencies then used very questionable numbers based on suspect data and it kept growing until it blew up.

No argument here.

All I want is an accurate accounting of what happened.

You pretty much covered it above.

As far as what ended up on my kids you and I will apparently have to disagree.

Where do we disagree? The government lent TARP money to banks, financial firms, AIG, Fannie and Freddie. The money was repaid along with a profit of about $70 billion and counting.

[volunbeer]

I am not necessarily arguing about where the TARP went. However, it is beyond doubt that the government borrowed huge sums (for everything) after the crisis. The preventable crisis was used as an excuse to open the floodgates for additional deficit spending, a crony payback stimulus, and crushing debt on my children.

There is not a doubt in my mind that the deficit is far worse now than it would have been. I am more upset with our government than I am the banks. The banks appeared (to me at least) to be the vehicle that a select group of people used to blow the bubble up.

I enjoy your post and understand what you are saying in defense of the banks. I do believe the right thing would have been for the banks to sound the warning, but obviously there are other people who had that responsibility. I want people to be accountable for what turned out to be a complete disaster. It is healthy to have an “after action review” of things like this. It was never done. My personal opinion remains that it was primarily a politically created disaster more than blaming the banks. The banks are an easy target to blame.

I want accountability. I want to know why Barney Frank (one congressman) was able to thwart oversight from congress. I want to know why the GSE’s obviously were able to lie to congress about the health of their portfolio (and the liars got huge bonuses). I want to know why the people we pay to regulate the mortgage and banking industries did not sound the alarm. There are a lot of questions and answers would be a healthy thing. How much of this started with “affirmative action lending” that were imposed on banks with 100 times the scrutiny as the fraudulent testimony presented to congress?

In the final accounting in my mind - I mostly blame our politicians so we should lay it all out there so the American people understand the consequences when the oversight committees and executive branch fail to do their jobs.

P.S. - there should be no GSE’s - just a bad idea all the way around. If a bank makes a loan they should own it from start to finish or sell it to another private bank. My kids should never be responsible for a bum loan.