TARP also bailed out foreign banks
TEXT OF INTERVIEW
Bill Radke: Most of us probably think of the TARP — the Troubled Assets Relief Program — as a bailout for the American financial system. The U.S. taxpayer certainly footed the $300 billion bill for all those loans to banks. But a report today says we also bailed out foreign banks. Marketplace’s Jeff Horwich joins me live now to talk about this. Good morning, Jeff.
Jeff Horwich: Good morning, Bill.
Radke: How did U.S. bailout money make it to banks overseas?
Horwich: Well the financial system is totally globalized, that’s no surprise to anybody, right? So when the U.S. bails out a big, failed insurance company like AIG, AIG’s doing business all over the world. Elizabeth Warren chairs this congressional oversight panel for the TARP:
Elizabeth Warren: Banks in France and Germany received billions. Yet the U.S. bore the whole $70 billion risk of the AIG capital injection program.
When AIG collapsed, AIG was on the hook to lots of banks because it had insured their rotten investments. The panel traced 87 banks that benefited from aid to AIG and found that half of those were foreign.
Radke: But Jeff, as you said, the financial system is global and everybody knows that, so why is this a problem?
Horwich: Warren’s frustrated that none of TARP’s administrators seem to be keeping track. And the panel found a big imbalance in the global bailout effort: the U.S. rescue gave money to 700 banks all over the world. Warren says the other developed countries’ bail-out packages combined reached fewer than 50.
Warren: If the U.S. had gathered more information about the flow of rescue funds, it could have asked other countries to share the pain.
Warren says if we are so lucky as to have to do this again, we need more international collaboration and a better real-time way to follow the money.
Radke: Marketplace’s Jeff Horwich. Thanks, Jeff.
Horwich: You’re welcome, Bill.
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