What to Make of TARP Profits?

McClatchy points out that not only are some banks repaying TARP funds, the government is making money on the deal:


The crux of the matter is that the government is being paid an interest rate on the TARP money that exceeds the rate of interest the government pays out on bonds. Now, I wouldn’t leap to the conclusion that taxpayers are going to make money on TARP overall, since the biggest loans are still outstanding and some of them—especially to Citigroup and double especially to GMAC—are unlikely to be repaid any time soon. But the important point here is that for all the complaining from both the right and the populist left about spending $700 billion on bailouts, the net fiscal cost of the $700 billion TARP program is likely to be dramatically lower. How much that net cost turns out to be will depend in part on the ultimate value of some of the stock warrants we own in all these banks, and also our common stock in Citigroup. But it is at least possible that the net cost will be zero or even negative, and pretty likely that the net cost will be pretty small.

Which isn’t to say that TARP is working perfectly. But the problem has little to do with cost. The real issue is that we’ve created for ourselves a significant forward-looking regulatory problem and I don’t see evidence that congress and the administration are prepared to solve that problem.