Jeremy Warner: Goldman may not be allowed to repay Tarp

Outlook Goldman Sachs is reportedly desperate to repay the $10bn of Tarp money it was forced to take in the thick of the banking crisis last autumn and believes itself easily capable of doing so. That way it escapes the conditions on pay and oversight the money imposed. Other more solvent banks are said to be trying to do the same thing.

But hold on a moment. The decision on repayment lies not with Goldman Sachs, but with the Federal Reserve, which may not be as keen to see the money back as assumed. Removal of the current obligation to have Tarp money on the balance sheet would introduce a perceived distinction between solvent banks that can afford to repay it and insolvent ones that are incapable of so doing.

The purpose of the Tarp recapitalisations was to underpin confidence in the solvency of the whole banking system. This purpose might be undermined if some banks are allowed to remove themselves from life support. It looks as if Lloyd Blankfein and his colleagues may have to wait a while longer before resuming their annual bonus payments.