Instead, Treasury used $105 billion of TARP funds to buy preferred stock in eight banks: Bank of New York Mellon, Goldman Sachs, J.P. Morgan, Morgan Stanley, Bank of America/Merrill Lynch, Citigroup, Wells Fargo, and State Street. The Capital Repurchase Program required banks to give the government a 5% dividend that would increase to 9%, encouraging banks to buy the government out. The government would make a profit, as bank share prices should be higher later.
TARP funds were used to buy preferred stock in, or loans to:
- AIG ($40 billion).
- Community banks ($92 billion).
- Big 3 auto companies ($24.8 billion).
- Citigroup and Bank of America ($45 billion).
President Obama wants to tax banks to repay taxpayers for $120-$141 billion it is estimated they will lose from TARP. Obama plans to levy the tax over 10 years on the banks' riskiest activities, such as trading, and not on their retail operations, which would get passed on as higher prices to customers.(Source: HuffPo, Obama to Push Tax on Too Big to Fail Banks)
Updated February 7, 2010

