Federal Overseer Notes Small Banks Can't Pay Back TARP Funds

Remember TARP? This program, invented during the cusp of the Bush-Obama administrations, essentially loaned a kaput American finance industry enough capital to keep itself afloat. The notion was that American taxpayers would receive dividends on its loan, and financial firms would pay back loaned money.

The largest firms have benefitted from this arrangement, while smaller community banks have struggled. That imbalance continues today, according to a report issued by Special Inspector General for the TARP Christy Romero. According to a story in marketwatch.com, Romero noted that nearly one-half of the remaining banks in the TARP program are behind in their dividend payments. Why? Community banks, according to the marketwatch.com story, "cannot find new capital. (Romero's report) noted that community banks with less than $1.5 billion in assets typically don't have access to capital from private equity firms, mutual funds, foundations, and other institutional investors."

The government report also observed that the US Treasury has "already written off or realized losses of $14 billion in TARP investments."

One curiosity about this story is the limited coverage it received. The story did get play in The Wall Street Journal and The American Banker. Some UK newspapers paid attention. And that was about it. The TARP story is a complicated, ominous one that underlines some uncomfortable facts. It's not as sexy as beating the drum for the latest gadget or social media whizbang. It's not as "helpful" as informing the public about how their intuition is wrong and that everything really is better. It doesn't help either presidential candidate and his "message." A lot of very powerful people and institutions want TARP swept under the rug. Will major media outlets, recently getting a wake-up call from a Pulitzer Prize committee that recently stiffed them, rise to the occasion?