When they learn that TARP was not a grant, many people ask why only Wall Street should get such loans and why the government should not give similar loans to bail out troubled companies in automobile, retail and other Main Street industries.
Taxpayers actually made a profit on the transaction. TARP was effectively a loan structured as a preferred equity purchase by the Fed from banks, who bought them back a few years later. The US federal government created the Troubled Assets Relief Program to rescue troubled banks during GFC. Many people think TARP was The learnings scaled new heights after Terraform, Voyager and FTX failed last year and Silicon Valley Bank and Signature Bank went bust earlier this year.īased on these lessons, I'm prompted to call BS on the popular narrative that banks privatize profits socialize losses. That said, I didn't learn about the dynamics of bank failures and bailouts until much later. Of a bank failing in front of my own eyes will surely go down as one of the most surreal experiences in my life!! (I'd left London by then but my office was situated in the same building as Lehman Brothers - imagine how surreal that would have been had I stillīeen there on that fateful day in September 2008!!!) I still remember the day I held the London Times in my hand with the front page splashed with the news of failure of Northern Trust Bank while I was standing just outside that bank's headquarters in Canary Wharf! The sight The narrative was, when banks do well, they distribute their profits to their employees and shareholders whereas when they do badly, they palm off their losses to taxpayers who rescue them via state-funded bailouts. I first heard the meme "Banks privatize profits and socialize losses" soon after some banks were bailed out during the Great Financial Crisis of 2007-8 in USA.
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