Is Troubled Asset Plan Really Gone for Good?

By Joe Adler and Cheyenne Hopkins


Though the government has tried — and failed — twice to create a program to buy troubled assets from banking companies, there is a growing concern that without such a program, financial institutions remain vulnerable if the economic crisis worsens. The Treasury Department is expected to announce today that a few firms have been allowed to repay Troubled Asset Relief Program funds, a sign of government confidence that the worst of the crisis may be over. Regulators have said they would scale back or put on hold a toxic asset plan, because bankers have appeared less willing to sell assets now that they have raised enough private capital to withstand additional losses. But a growing number of skeptics argue that policymakers have been here before, with regulators confident that capital infusions would be enough to stabilize the banking sector, while toxic assets continued to eat away at balance sheets. Karen Shaw Petrou, managing director of Federal Financial Analytics Inc., said: “The asset problem is there. It was there before the Tarp was put in place before October, and it will be there after the Tarp is gone, because it never addressed the asset problem other than by providing banks with federal dollars in hopes that that would permit writedowns. Now some banks are raising private dollars in hopes to do the same. There’s still a lot more to come.”