Socialist Worker

Obama’s bailout ‘profit’ is a lie and a distraction

Published Tue 22 Jan 2013
Issue No. 2337

The US bailout is within a whisker of being paid back.

What’s more, president Obama regularly claims that its main component, the Troubled Assets Relief Program (TARP), actually made a profit out of the banks and big businesses.

But it's not true—as he was reminded last year by TARP inspector Christy Romero.

Banks have been able to scam their way out of bailout obligations by paying back their TARP debt with other government loans.

John Schmidt, boss of Heartland Financial, admitted to playing “a bit of a shell game” by claiming £57 million from the Small Business Lending Fund to repay TARP.

More than half of the £2.5 billion fund, originally intended to protect small businesses, ended up being spent this way.

Swaps such as this allowed banks to pay a lower interest rate and get out of the few conditions that came with TARP—such as a cap on executive bonuses.

Toxic

Compared to Britain, the US bailout put far more emphasis on buying up the banks’ toxic assets, rather than just shares in the banks.

Where Britain’s government absorbed losses as the banks’ share prices fell, the US government propped the prices up.

It has done everything to cover up the rotten state of the banks. It lent its name to their misleading reports and hid the amount of state aid they've received so banks appear to be more creditworthy.

Investigative journalist Matt Taibbi says, “The government has turned the entire financial system into a scam in which the value of just about everything in the system is inflated”.

Now the biggest US banks are bigger than ever, and making enormous profits.

They’re not investing much, except in the same high-risk areas they lent to before the credit crunch.

In 2011 they increased their investment in “junk-rated” companies by 74 percent.


Article information

Background Check
Tue 22 Jan 2013, 17:05 GMT
Issue No. 2337
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