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Friday, April 17, 2009

TARP Banks

Lately in America you've been hearing a lot about the government bailing out banks. The federal government implemented a Troubled Asset Relief Program ("TARP") to help the banks cope with loan losses - otherwise known as troubled assets. The relief at the time was for the government to inject additional capital into those banks. The result was that the government became a shareholder in those banks receiving the capital.

Perhaps you heard about the government bailing out the AIG company, which was the world's largest insurance conglomerate. (It also counts as a bank.) The government purchased 80% of the stock of that company, in return for a sufficient amount of capital to keep the company afloat. Of course the later scandal broke when we learned that AIG used lots of that money to pay off its debts ... to foreign banks. Then, to add further insult to injury, AIG used lots more of that money it got from the American taxpayers to pay bonuses to high-ranking executives - most of whom are not U.S. citizens or taxpayers.

But I digress. The point I want to take you to this day is to put the banking bailout into perspective for you. I think, quite frankly, that the AIG insurance bailout is sufficiently in perspective for you. The media has done a splendid job of that. I suspect that the bailout of General Motors and Chrysler may also be coming into perspective for you. Neither is getting the kind of money that the banks got. And the media is doing a good job of keeping us informed. But for some reason, it doesn't seem that the full story on banking has gotten out. So I'm here to help with that.

As of March 24th, 2009, a total of 520 banks across the U.S. and Puerto Rico have received $280,576,729,000 in capital. That means the U.S. government has purchased that much in stock in those banks. If you're not familiar with so many zeroes, it is more than $280.5 billion U.S. dollars --- of taxpayer money --- that has been invested in these 520 banks. That equates to about $935 worth of bank stock for every one of the approximately 300 million citizens in the U.S. today.

How would you like if it the government ordered you to buy stock in banks of its choice? If you're a family of four, you would have to purchase $3,740 worth of stock in banks the government would pick for you. And by design, they would be banks that are in likely to be in trouble, struggling with losses. And the government is forcing you to purchase the stock.

If you're a single mother with three kids, you have to buy $3,740 worth of bank stock too. If you're an elderly couple, you get off only buying $1,870 worth of bank stocks. But for every man, woman and child alive in the U.S. today, and here legally, the government would require $935 worth of stock to be purchased in troubled banks.

Folks - this has already happened in America in the last 12 months. Did you know that?

Now I won't say that this wasn't a good investment, or a necessary move on the part of our government. The truth is that I don't know. But the numbers are eye-catching. Citigroup - once the world's largest bank - received $50 billion. That equates to $166.67 worth of Citigroup stock that the government has purchased ... for every man, woman and child alive and legally living in America today. Bank of America received $45 billion. That's $150 worth of Bank of America stock that the government has purchased for every man, woman and child alive and legally living in America today. Folks, these are big numbers.

Of the top 21 recipient banks, each of them received enough capital to equate to at least $5.25 for every man, woman and child alive and legally living in the U.S. today. To be fair, many banks didn't get so much. Quite a few received less than a penny per U.S. citizen. Fifteen of them received less than $1 million total. Freeport State Bank in Harper, Kansas was at the end of the line, getting only $301,000 from the government. Of course, that's how much stock the government purchased in Freeport State Bank.

So what do you suppose the Biblical perspective is on all this? What do you think Jesus would do about our troubled banking system? Would He let them fail? Would He hold the bankers accountable for their poor decisions? What of the risks? Would He agree that the consequences of the various poor choices were just too great for our society to suffer? (That's what our government decided.)

I don't have all the answers on this subject. But I believe it is necessary that we look at the questions. As Christians, or just as responsible citizens - we need to be giving this a lot of thought. We should be weighing the moral aspects of the decisions our government is making. If we agree that they are the right decisions we should support them and be prepared to be taxed to pay for these decisions. If we don't agree that they are the right decisions, we need to be letting our elected federal officials know.

So the real question is not what our government should do. Rather I believe the challenge is to ask what the average American citizen should do. To that end, we all need to become much more aware of TARP banks!

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