Rise of the Bank Bailout Defender
April 11, 2010
The idea that eminently safe investments like money market accounts, savings accounts, and CDs could disappear in the wind threw everything into a panic in the year 2008. That sense of fear has not totally subsided by any means.
Still, programs like the TARP bank bailout fund have been incredibly unpopular.
Now, anti-critics are emerging in droves, arguing that TARP is the best thing that could have ever happened to your money market account, savings accounts, and CD portfolio.
TARP Put Money Directly Into the Banks
TARP, at $700 billion, is often confused with the fiscal stimulus bill, which came in at $787 billion. In reality these are two separate spending bills. TARP was the portion that went to banks.
According to banking analyst Dick Bove, the TARP program was a brilliant plan that quite literally saved the banking system. Bove thinks Henry Paulson deserves lots of praise for putting so much cash into banks.
Other commentators have, of late, been offering similarly positive words about TARP.
The Effect of TARP on Bank Rates, If Any
So was TARP a plus or a minus for savers? Both, it looks like.
Ironically, it may be possible that TARP saved your actual savings account from being eaten up by your bank's poor investments in worthless assets and debts, but TARP also, at the same time, is helping to keep bank rates on money market accounts, savings accounts, and CDs artificially low.
When banks can access funds from the U.S. government with such ease, with a continuing guarantee that more is available as needed, the bank business model of previous generations--pay interest on deposits, then lend those deposits out at higher interest rates--begins to look a bit old-fashioned.
