What Could TARP Payback Buy? Try 123,000 Homes

Troubled Asset Relief Program, and the Treasury Department

Could the billions of dollars that banks are slated to pay back to the government eventually help you save your homes or borrow for your small businesses?

The Federal Reserve is scheduled to announce next week which of the country's biggest banks will be cleared to repay the funds they received through the government's Troubled Assets Relief Program. At least five big banks have applied to return the funds, according to Reuters: JPMorgan, Goldman Sachs, Morgan Stanley, American Express and Bank of New York Mellon, which received a total of more than $51 billion from the government.

VIDEO: Ten Banks fail stress tests
null

The Treasury Department has said that repaid funds from the big banks would be used by the government to invest more money in the nation's smaller banks -- those with less than $500 million in assets -- which could then use the funds to increase lending to consumers and businesses.

What could the small banks do with $51 billion? That remains to be seen but, to put it in perspective, $51 billion is enough to:

Buy 123,162 foreclosed homes in California. (The average price of a foreclosed home sold in California, which leads the country in foreclosures, was $414,086 in April, according to RealtyTrac.)

Buy a new car for every family in Alabama. (The average price of a new car sold in February was $29,347, according to the National Automobile Dealers Association.)

Fund annual tuition for more than 7 million students attending public colleges and universities. (Average annual tuition at public four-year colleges in the United States was $6,585, according to The College Board.)

While it's uncertain exactly how each bank will spend the funds, Treasury Secretary Timothy Geithner has made clear what the money should not be used for: bailing out cities and states with budget shortfalls.

"We do not believe that TARP as currently designed and legislated provides a viable solution to this specific challenge," Geithner told a Senate committee last month.

The idea of recycling TARP funds has rankled some in Congress, including Sen. David Vitter, R-La., who last month sent a letter to Geithner noting that the law authorizing TARP specified that any money repaid to the government be used to reduce the public debt.

Vitter re-asserted his objections Tuesday to the use of repaid TARP funds for anything other than debt reduction.

"On the one hand, Treasury is paying down the debt and, on the other hand, they're increasing it," Vitter said in an e-mailed statement to ABC News. "The taxpayer benefits under this scenario for about 10 minutes before Treasury repurposes taxpayer money. And even though I didn't support the original TARP legislation, this is clearly not the intent of the law that many of my colleagues thought they were endorsing."

But Geithner has maintained that the Treasury is following the law.

The law gives the government the flexibility to provide "additional reinforcement to help improve credit markets, help address the housing crisis [and] help get lending to small business flowing again," he said in an interview with CNBC Tuesday. "We'll use that, because, again, we want this economy to emerge as quickly as possible, [for] a stronger foundation for growth."

A Treasury Department spokeswoman did not return calls for comment Tuesday.

Billions in Profits From TARP?

According to the Treasury Department's most recent report on TARP transactions, 20 banks have already paid back nearly $1.8 billion in government funds.

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...
See It, Share It
PHOTO: The fake baby a man was carrying as he and another woman tried to sneak into the mother and baby unit at Mercy Medical Center in Merced, Calif., hospital officials said.
Dignity Health Security/Mercy Medical Center Merced
PHOTO:
dpa, Jens Wolf/AP Photo
PHOTO: U.S. Customs and Border Protection officers at the George Bush Intercontinental Airport in Houston stopped a would be smuggler from bringing nearly 7 ounces of cocaine into the country in tamales, Aug. 22, 2014.
U.S. Customs and Border Protection
PHOTO: Giant panda Bao Bao celebrates her first birthday at the Smithsonians National Zoo, Aug. 23, 2014.
David Galen, Smithsonians National Zoo