On Wednesday, most of the public attention on the TARP
program was focused on Treasury’s announcement that it intends to fully
its investment in General Motors within the next 12-15 months.
That’s not surprising given that GM is one of our largest
TARP investments. And it came on the heels of Treasury exiting its common stock
investment in AIG earlier this month. Overall, the Federal Reserve and Treasury
fully recovered the $182 billion committed to stabilize AIG during the crisis –
with an additional $22.7 billion
Even if you caught the headlines on GM, though, you may have
missed another important TARP milestone that happened on the same day.
On Wednesday, Freeport State Bank based in Harper, Kansas –
which received the smallest investment ($301,000) made through TARP’s Capital
Purchase Program – repaid taxpayers in full with interest.
Speaking to the Wall Street Journal, the bank’s
chairman and CEO, Leon Drouhard, explained the critical role TARP played in stabilizing
the economy during the worst financial crisis since the Great Depression.
“[TARP] has been a very important
thing and it has been a beneficial thing . . . It’s always referred to as a
bailout but it was actually an investment in the financial system of the
country as far as I’m concerned–and that investment turned out to be a good
investment for the Treasury, and the country and the banks involved.”
Mr. Drouhard told the Wall Street Journal
that TARP allowed his bank to “lend at a steady pace through the
downturn.” That means that people in his local community had better access to
the loans they needed to buy a home or start a business during a time when
credit became especially scarce.
Indeed, while most people think of large financial
institutions when they think of TARP, the program invested funds in more than
400 smaller, community banks. And those investments had an important, positive
impact in thousands of local communities all across the country.
Timothy G. Massad is Assistant Secretary for Financial
Stability at the U.S. Department of the Treasury