Banks aren’t necessarily the most responsible institutions. After all, they had to get rescued by the government for failing to behave the way banks should and making risky decisions. Now that they are showing profits, many argue that they should be responsible for once and pay back the bailout money sooner than their original deadline and raise private capital as usual.
When the government sees this money back, it can help fund stimulus programs and control the national debt. However, given the central role of bank failure in creating the current crisis, pulling this funding back before there is a definite and consistent improvement could prompt a horrible economic reaction.
Banks are doing better than they were. There’s no doubt about it. In fact, according to the New York Times, JP Morgan Chase earned $3.6 billion in the last quarter, and ten big financial institutions paid back nearly $70 billion this year. It’s easy to understand why many are upset. With worries about the national debt and concerns about how Obama’s stimulus package is going to affect the future of our economy, it’s not unfair to wonder why the banks are taking so long.
To some extent, this is an important concern. However, these banks just got back on their feet. You’d think most Americans just weren’t around a year ago when some wondered whether or not this was the end of our economy. Banks were a major driving factor behind the financial crisis. When they don’t operate properly, when they fail, we can be pushed into a recession as we were before. Regulators have warned that “huge losses tied to commercial real estate, home mortgages and defaults on credit cards” are still present, and that banks are just not ready. Those Treasury officers who disagree have a right to their opinion, but it’s shocking how easily they would accept that risk.
Months of profit don’t prove that our banks are permanently moving in the right direction. Before we risk putting the U.S. economy back in turmoil by placing unnecessary stress on the banks (the money isn’t due back yet, after all), I would like to see consistent, high profits, and positive signals from the economy as a whole. Those who are in favor of forcing banks to pay back that money early should be fully ready and willing to accept the risk that comes with it. It’s more than possible that it would extend or deepen the recession we’re already in, and that’s certainly not worth it for a little extra funding.