Will TARP repayment kill the zombie banks?


Use two buzzwords in a sentence and you're asking for trouble. But since $12.8 trillion of taxpayer money is at stake, it's a risk I need to take. The Treasury is poised to announce that it will let some banks that got Troubled Asset Relief Program (TARP) money -- JPMorgan Chase (JPM) and Goldman Sachs (GS) -- repay the money. The only problem with this is that such repayment will damage the zombie banks -- those that our tax money is propping up which would otherwise fail.

How will TARP repayment harm zombie banks? As I posted, it all comes down to money and people. Wall Street pays better than anywhere else on the planet. At least 60 percent of the revenue goes out to its employees every year. If Goldman no longer has TARP money, it could be free to pay its people as much as it wants without suffering the political pressure that comes from holding on to taxpayer money.