We should not have let Goldman Sachs, J.P. Morgan, and the other banks payback the TARP funds until lending returned to near normal levels in the economy as a whole. These companies greatly benefitted at taxpayer risk from the avoidance of a systemic meltdown in the financial system. They are still benefitting from the FDIC guaranteed bonds they issued to secure below market interest rates. And of course, no one benefitted more than Goldman Sachs when they received 100 cents on the dollar for their subprime "hedges" from the AIG bailout. What Goldman Sachs, J.P. Morgan, and the other banks did with the TARP funds was they sat on them. Rather than extending credit to the real economy and taking on some lending risk for the good of the country with the TARP funds, these companies dramatically tightened credit standards for the good of themselves. The banks are now the only lending game in town. They must step up and fill the lending void. You can lead a horse to water, but you can’t make him drink. Now that they are returning the TARP money what should the Treasury Department do with the funds?
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