With all the banks lining up to repay the taxpayer loans they received from the Troubled Asset Relief Program, the government is faced with a dilemma: How much reward should Uncle Sam demand in return for the risks it took?
It's a multi-billion-dollar question. It's also a question the government might not be facing if lawmakers hadn't decided to take advantage of the situation and put in place so many rules such as restrictions on executive pay and hiring as well as the limits on the infamous bonuses. Those are among the reasons the banks want out of the bailout program so badly.
I know lawmakers were reacting to public outrage about a few unsettling reports about mega payouts to some folks at
Bank of America's
Merrill Lynch unit. The populist appeal of such restrictions continues to spur the Obama Administration and Congress to confront the executive pay issue. But that's another issue.
The issues for today's column are how much profit the government should make on the winning investments it made to banks and how long do we want the government owning stakes in our financial institutions.
One consideration is that the government should get the maximum possible from the strongest banks to offset the potential losses of the weaker banks that may never be able to repay taxpayers.
Another concern is whether the banks, in their eagerness to escape government mandates, may be acting prematurely and end up back in line for government handouts. Would the government prolong the recovery by releasing banks from the bailout program so soon?
A third argument is that getting the government out of the boardrooms of the banks is best for everyone, so the government should make it as painless as possible to repay the TARP funds. Why burden the banks and their shareholders with hefty costs to wean the banks from the dole?
The tricky part in all this is deciding on the value of the shares the government was promised by the banks in exchange for the cash infusions they received. The banks must repay the loans
buy back the collateral for the loans as well.
, the only publicly traded bank that has repaid its TARP funds, ended up paying $1.2 million to buy back warrants granted to the government -- double what the bank thought the warrants were worth, according to the AP. That was on top of repaying the $100 million in TARP funds it received.
So how much will
have to offer the government to escape the TARP trap? These big banks may be the litmus test since they are among the first billion-dollar TARP recipients to apply to repay the government loans.
Should they have to pay top dollar just in case other banks end up stiffing the taxpayer? Should they be forced to stay in the bailout program just to be on the safe side? Will the Obama Administration be willing to release them from the control of the TARP mandates?
Personally, I'd like to see the government get out of the banking business as soon as possible. I don't like the Treasury being a major shareholder in private-sector companies.
I'd like to see the $700 billion in taxpayer funds returned as quickly as possible, and that's good enough for me. I don't think the government needs to make a profit on the bailout.
Government greed won't do anyone any good.
Hall is the editor of
. Previously, he served as deputy editor and chief innovation officer at
The Orange County Register
and as a news manager at
in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at
in Fort Wayne, Ind. His work also has been published in a variety of newspapers including
The Wall Street Journal
The New York Times
International Herald Tribune
. Hall received a bachelor�s degree in journalism and political science from The Ohio State University and has taken graduate management science courses at Boston University.