• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • CIT Bankruptcy Shows that It is Time to End TARP

    Sunday, CIT Group, with $71 billion in assets one of the largest small business lenders in the country and the recipient last December of $2.3 billion in taxpayer money filed for bankruptcy. It was the fifth largest bankruptcy in US history.

    Monday, nothing much happened. Stocks didn’t collapse. There was no panic. In fact, all of the major US stock indices actually went up. Even a tracker of all of the financial stocks in the S&P 500 stock index only lost about 0.14 percent. CIT’s failure was pretty much a complete non-event.

    Now, there is substantial proof that there is no further need for TARP, and there is every reason to end the program as quickly as possible. TARP’s continued existence will make it a political slush fund available to meet the demands of whatever powerful interest group feels the need for taxpayer help. The latest such group is the smaller banks, but if the collapse of a major financial didn’t cause more than a small ripple in the economy, it is hard to argue that comparatively tiny banks will cause much more. After all, there are about 8,400 of them, and while several hundred may fail in the next year or so, new ones are chartered on a regular basis.

    The good news is that the financial crisis is clearly over. The bad news (and there always is some) is that the taxpayers’ $2.3 billion vanished in a puff of smoke – one of the debts that will be extinguished in the bankruptcy. This offsets much of the profits that the government made when several banks repaid their TARP advances, and is a reminder that TARP was a gamble that paid off by helping to stabilize the financial sector, but could still cause billions of dollars in losses. Further recycling TARP repayments to small banks, auto companies, or whatever other industry comes along will only increase those losses.

    The crisis is over, and it is time to close TARP. It served a purpose, but now it is time to recoup the tax dollars that went to fund it.

    Posted in Economics [slideshow_deploy]

    4 Responses to CIT Bankruptcy Shows that It is Time to End TARP

    1. Garge Kibby, Iowa says:

      A big part of keeping this bill under budget, is paying for it years before anything happens. If this is such a great idea, why don't we use the same idea and make the two other government controlled companies use the same technique. So from now on, when you want to buy a GM or Chrysler automobile or truck, you have to make payments on them for 3 years before you actually get the vehicle. And you won't really know what you will be driving until it shows up at your local Obama approved dealer.

    2. Nicolai Alatzas, New says:

      Student Loans for citizens can't be eliminated through any type of Bankruptcy.

      Can someone please explain how a company can take 2.3 billion and file out of responsibility.

      How is this legal? How much were the Board Members paid to do this to America?

      And why are you people not pissed?

      I hope someone has an answer.


    3. Pingback: TARP: It Couldn’t End Thune Enough | Conservative Principles Now

    4. Pingback: TARP: Will This Crony Capitalist Slush Fund Ever Die? | Conservative Principles Now

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.