Shaky Banks Still Haunt the Bailout

Occupy LA protesters are reflected in an advertisement sign at the Move Your Money March on what is being called Bank Transfer Day on November 5, 2011 in Los Angeles. Photograph by David McNew/Getty Images

Right now, taxpayers are in the black on the program that bailed out banks. But weaker banks that haven’t repaid their loans may still leave us in the red. That’s the problem the Government Accountability Office points to in a new report looking at the government’s single largest bailout effort, the Capital Purchase Program. Treasury started CPP in October 2008 to provide liquidity and stability for banks. Ultimately Treasury propped up more than 700 banks with almost $205 billion. The banks make dividend and interest payments to Treasury; then, to exit the program, they repurchase warrants and preferred shares and repay loans. The GAO says those revenue sources have brought in $211.5 billion for taxpayers—a $6.6 billion profit above the initial infusion into the institutions.

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