Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Going Bankrupt: 100 Bailed Out Banks

Posted by hkarner - 29. Dezember 2010

Barry Ritholtz, RGE Monitor, Dec 27, 2010 3:02PM
The WSJ reports today that nearly 100 U.S. banks that got TARP funds from the federal government in Q4 2008 are in danger of going bankrupt. 
 

So far, 7 bailout recipients have failed, resulting in more than $2.7 billion in lost TARP funds. The balance of the remaining potential failures relatively small banks — the median size was $439 million in assets, and the median TARP infusion was $10 million apiece:

“Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.

The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators. The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program.

When TARP was created in the heat of the financial crisis, government officials said it would help only healthy banks. The depth of today’s problems for some of the institutions, however, suggests that a number of them were in parlous shape from the beginning.”

There are many many reasons not to bail out failed banks: Moral Hazard, rewarding the incompetent, thwarting legitimate competition, reducing incentives to be risk averse. We can add another to the list: Throwing away billions of dollars . . .

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