Smart Borrower Blog

Bailout Has Not Saved All Banks

Dec 23rd, 2009 @ 11:21 PM by Amber Nelson

New data from bank research firm SNL today showed that even though high profile banks like Wells Fargo, Citigroup, and Bank of America have paid off their government loans, there are 55 smaller lenders that have fallen behind on just repaying the required quarterly dividends as of November. There were only 33 such tardy banks in August.

To date, the government has shut down 140 banks this year, a record high since 1992, and this new data shows that more closings may follow next year as lenders are unable to meet their financial responsibilities.

The government loans are part of the $700 billion Troubled Asset Relief Program, started under the Bush administration in August 2008 to combat bank failures. Banks that accepted federal funds are required to pay a 5 percent dividend rate each year for the first five years.

The 55 companies now in the hot seat have received in sum about $5.06 billion, or roughly 3.8 percent of all the money spent under the TARP capital purchase program.

A Reuters article reporting this story made a disturbing statement:

“The government has said it expects to lose money from its TARP program.”

That’s unnerving because when the program was announced plenty of people were upset about how much it would cost tax payers. The government response was that the American people would actually make money on the deal as companies paid back the loans with interest. But now the government says it expects to lose money? Hmmm…

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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