Word: bankses
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Some see this as a smart move. Last week, Senate majority leader Harry Reid, a Democrat from Nevada, sent a letter to Treasury Secretary Timothy Geithner urging him to consider giving TARP funds to more small banks, even those that might fail without government assistance. "Comparatively modest assistance from the...
But the government's continued assistance to the financial sector comes at a time when the prospects of many banks are improving and most economists believe the financial crisis has largely ended. Earnings at a number of large banks are rising again, and some smaller banks have been able to...
"There was never a good economic rationale for bailing out smaller banks," says Vincent Reinhart, a fellow at the American Enterprise Institute and a former top Federal Reserve economist. "Extending the program only compounds the mistake." (See 25 people to blame for the financial crisis.)
What's more, many of the banks getting money now appear to be in fine financial shape. U.S. Century Bank, for example, boosted its net interest earnings, a key measure of profitability for banks, nearly 20%, to $12.6 million, in the second quarter of this year. Yet in early August...
The Treasury Department says the TARP funds were never meant to solely prop up failing banks. In fact, officials say one of the criteria for getting funds under the TARP's Capital Purchase Program, in which the government injects money into a bank in return for preferred shares, is proof...