Taxpayers: can you afford to shell out any more money to pay for another failing industry or institution?

Last month when we wrote about the embattled commercial real estate market — saying it was primed for failure — our readers reacted by saying that they’re tapped out, that they can’t afford another bailout. However, the latest financial threat to taxpayers may not be a bailout at all — we just may not be getting paid back for money we lent early on in the crisis.

According to Financial Times, if struggling lender CIT files for chapter 11 bankruptcy, consumers may have to eat over $2 billion that was loaned to the institution, while investment firm Goldman Sachs is contracted to recover $1 billion off the bankruptcy: Read the rest of this entry »

The AIG bonus spectacle of last week convinced Goldman Sachs to repay their TARP money ASAP, thus defeating the purpose of having taken it in the first place.

Now comes the unsurprising news that more banks want out of TARP:

For relatively strong banks, doing business with the government may be more trouble than it’s worth.

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The Obama administration has announced that executives at certain banks which have received TARP funds will have their pay capped:

The Obama administration outlined plans today to tighten restrictions on executive compensation for future recipients of federal aid under the government’s financial rescue program, but the large majority would be able to opt out of most of the limits.

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I was thinking about the plan laid out in Foreclosure Assistance Through Eminent Domain?, in which the National Community Reinvestment Coalition (NCRC) urged Congress to adopt their large-scale loan mod program by seizing mortgages via eminent domain:

…the NCRC believes that by utilizing the government’s power of eminent domain, “legal impediments regarding the complexity of selling loans held in securitized pools” can be avoided. Under the plan, eminent domain eliminates an investor’s say in the loan mod process, since the government would purchase the property directly.

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President Bush agreed this morning to seek the second half of the TARP funds for President-elect Obama. Once President Bush officially requests the remaining $350 billion, Congress will have 15 days to decide whether or not to release the cash. New spending strategies are expected to accompany the money if Congress votes in favor of releasing it. While the Treasury Department diverged from the TARP’s original approach, it may evolve even more under the new administration:

…Obama and his fellow Democrats want more of the money to go directly to consumers struggling with a wave of home foreclosures and stricter limits to be imposed on those who receive the aid.

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