Troubled Asset Relief Program Bails Out Over 100 Institutions

The Troubled Asset Relief Program (TARP) has surpassed the 100 bank and institution bailout point totaling $167,756,852,000 in taxpayer money under the Capital Purchase Program according to the December 16th, 2008 Transaction Report by the Treasury.

The first bailout recorded on the Capital Purchase Program was on October 28, 2008 for a total of $15,000,000,000 awarded to Bank of America. On that same day Citigroup, JP Morgan Chase and Wells Fargo have recorded the largest single transaction of $25,000,000,000. Since then the Treasury has eased its spending somewhat with the largest single transaction for the month of December in the amount of $935,000,000 to Popular, Inc. of San Juan Puerto Rico.

The Capital Purchase Program is equivalent to investing in the stock market. What happens is the Treasury purchases stock in these companies, in return this frees up cash for these institutions to lend to the general public on mortgage loans, car loan etc. If the Treasury places money into the right institutions there is a very good chance your money would turn a profit for the government. Money placed in the wrong institutions is basically chalked up as a loss.

However, there seems to be consensuses out there that these institutions are hoarding the cash for the Capital Purchase Program as the market continue to deteriorate. In the meantime the Treasury continues to put pressure on these institutions to make new loans that would in return revive the housing market.

The only problem right now is home values continue to deteriorate at a rapid pace; you can almost compare it to the drop in value of a new car after you drive it off the lot. This has led to The National Association of Realtors and National Association of Home Builders to push Congress into approving another stimulus package, dubbed “Fix Housing First” , that would give homebuyers tax incentives and subsidized mortgage rates, as low as 2.99 percent 30 year fixed, to help stabilize home values.

It could be speculation but the next round of foreclosures may be on the horizon, and it has already been dubbed the Option Arm round. 60 minutes did a piece on how Option Arms are about to reset and many homeowners with these loans are having troubles paying their 1 percent teaser rate which will reset at a much higher rate.

It may not be as much as banks hoarding cash as they are preparing to hold the cards for the next round of bailouts that will be facing the U.S. housing market. Only time will be able to tell if the banks receiving and hoarding funds from the Capital Purchase Program are doing so wisely or selfishly.