46 TARP Recipients Miss Payment Deadline

Forty-six companies that received federal dollars last year missed their dividend payments to Washington as of Sept. 30.

 NEW YORK CITY, N.Y. — Forty-six companies that received federal dollars last year missed their dividend payments to Washington as of September 30.

The first recipient of the Troubled Assets Relief Program (TARP) dollars to collapse was United Commercial Bank of San Francisco on Nov. 6.

The Washington Post reported that UCB’s failure cost taxpayers $299 million, and more failures of bailed out firms are expected in coming months.

However, critics of the TARP program are saying, “I told you so” because billions of taxpayer dollars were given away without question or strings attached.

Such was the case with CIT Group, whose business model consisted of borrowing cheap money cheaply only to lend it out again.

Once the credit markets dried up last year, the 101-year-old firm could no longer sustain its operations soundly, and should have declared bankruptcy in December 2008, an analyst told the Post.

Instead the Federal Reserve during the Bush administration unanimously approved CIT’s application to become a bank holding company, keeping it afloat with taxpayer cash.

But the firm’s problem loans increased to $2.3 billion six months later. It originally had $477 million in problems loans back in December 2007.

Now CIT is in bankruptcy since the Obama administration found the firm would not harm the economy if it failed.

However, the American taxpayers will not see the same protection on its $2.3 billion investment as CIT’s bondholders and customers, the Post noted.

Phillip Swagel, an assistant Treasury secretary until January, told the Post that failures such as CIT’s are “inevitable when you invest in hundreds of institutions, that some of them are going to go bad.”