The Treasury announcement today that 10 of the largest financial institutions participating in the TARP’s Capital Purchase Program have met the requirements for repayment carefully avoided answering one important question: did any financial instituion fail to meet the requirements?
This is an important question. There is already speculation that Wells Fargo may have asked to get out of the TARP and been rejected. After all, Wells Fargo has been very vocal about wanting out. In fact, it’s been widely reported that Wells never wanted to take TARP funds at all.
Treasury Secretary Tim Geithner has shown a reckless disregard for the law when it comes to TARP repayment. He proposed various tests for TARP repayment, including the ability of a bank to borrow outside of explicit government guarantees and the ability to privately raise new capital. But the law actually prohibits such conditions, explicitly saying there should be no barrier to repayment.
Even now its unclear exactly what makes some institutions eligible to complete the repayment process and what makes some ineligible. The Treasury’s failure to handle this matter transparently is problematic, although characteristic of the Obama administration’s tactic of talking about transparently while keeping its cards very close to its vest. Shouldn’t taxpayers be allowed to evaluate the government’s criteria for TARP repayment? Shouldn’t there be a public debate about the application of this criteria to various financial institutions?