Why are banks so desperate to get out of TARP?

Talk about ingratitude! News that two of the country's largest banks have agreed to raise billions of dollars from investors to pay back bailout loans from U.S. taxpayers seems preposterous on its face and even worse after a little thought. Citigroup has reached a deal with federal regulators to repay $20 billion, after the government sells its $25 billion stake in company stock, according to Cable News Network (CNN), and the government has agreed to a $25 billion repayment in full from Wells Fargo Bank, according to the Reuters international news service. The two banks are the largest still in the Troubled Asset Relief Program, set up by the United States to prop up the ailing U.S. financial system in 2008, and are trying to get out of the stricter regulation required of institutions that accepted taxpayer financing. The announcement coincides with meetings between U.S. President Barack Obama and bank CEOs in Washington, D.C., to discuss the future of the financial system. While it's certainly a good sign that banks are able to repay their government loans, releasing them from regulatory obligations seems counterproductive. Citigroup, for example, is expected to report a $1.1 billion loss in the fourth quarter of 2009. Maybe regulators can explain how a bank losing money can afford to pay a $20 billion bill? Wells Fargo was in much better shape than Citigroup when the financial system tanked, needed less borrowing and agreed to fewer restrictions, Reuters said. Wells Fargo plans to raise most of the money by selling additional stock, Reuters said. The Citigroup deal is more complicated, and involves the issuance of billions of shares of Citigroup common stock, now selling around $3 a share, and the sale of new securities. That's great if the instruments sell, and if the bank can afford the additional burdens. But Citigroup is losing money. What it looks like is that these institutions are desperate to get out of government-imposed restrictions on how much they can pay their top executives. Isn't that the same kind of bad management and poor accounting that got these companies into trouble in the first place?

Credibility deficit could doom Bernanke renomination

It might be funny, if the economic crisis wasn't so painful to so many, to hear U.S. Federal Reserve chairman Ben Bernanke complain about efforts in Congress to overhaul the government's financial regulatory system. Bernanke was sharply critical of a Senate proposal to transfer much of the Fed's authority to regulate banks to a new consumer protection agency, according to the New York Times. Bernanke wrote an opinion column on the Washington Post Web site warning Congress and taxpayers unhappy about the nearly trillion-dollar bailout of the financial sector to leave the Federal Reserve system alone. "Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation," Bernanke wrote. But Bernanke, appointed by former U.S. President George W. Bush in 2006 and nominated by U.S. President Barack Obama to a new 14-year term beginning next year, has a lot of explaining to do. Particularly, he needs to explain why the Federal Reserve and executive branch regulators were seemingly asleep at the controls when the financial system tanked. It was fairly obvious even to lay people that the overheated housing market, where financial institutions were allowed to make thousands of bad home loans and then sell those bad loans to other institutions as securities to back even more bad loans, was headed for a crash. So, why didn't regulators -- and Bernanke, the lead expert -- stop such practices before it was too late?

Madoff case is a distraction, albeit a huge one

News that confessed swindler Bernie Madoff has been ordered to stay in jail until his sentencing in June must be some solace for his many victims, but it should not be confused with the current turmoil in the economic system. Madoff, who pleaded guilty last week to running a massive Ponzi scheme that defrauded investors of billions (!) of dollars over 20 years, lost his appeal of a federal judge's decision to jail him immediately after his plea, according to the Reuters international news service. The former Nasdaq chairman had apparently hoped to be released on bail prior to sentencing on charges that probably mean the 70-year-old will die in prison. But a federal appeals court said he was a potential flight risk and could have secretly stashed money overseas. Madoff had been confined to his luxury Manhattan penthouse for three months after his arrest in December and seems to have been seeking to return until at least June. "The defendant has a residence abroad, and has had ample opportunity over a long period of time to secret substantial resources outside the country," the judges said. But Madoff's crimes, while devastating to his victims, simply do not approach the level of misconduct on Wall Street that led to the loss of trillions of dollars in investments and devastated the world economy. The wheeler-dealers who gamed the financial system with recklessly over-leveraged investments and the regulators who let them do it, sometimes knowingly, still must face legal reckoning.