U.S. consumer prices slow &banks repay TARP

June 15, 2009 12:35 p.m.

Consumer prices in the U.S. rose just one tenth of a percent last month. Over the past year they have fallen 1.3 % . This is according to the U.S. Bureau of Labour statistics the largest fall in the index since 1950.   So inflation pessimists have little reason to cry alarm over inflation breaking out any time soon.In another piece of good news a number of leading banks who received TARP monies have paid them back plus dividends and interest. In addition in several cases the U.S. taxpayer still holds warrants for the purchase of common stock in the years to come which will be a profitable transaction for the taxpayer.

So far ten banks are in the process of paying back about 68 billion .U.S. Bancorp has redeemed $ 6.6 billion in preferred stock, BB&T $3.1 billion plus dividends, and Goldman Sachs, Morgan Stanley, J.P.Morgan Chase, American Express and Bank of New York Mellon are expected to join them in the coming days.Tarp turns out despite all the skeptics to have been a good investment, at least as far as these banks are concerned.

Over time I believe this will be true of almost all of the TARP investments.Of course, legitimate criticism remains about how long it has taken for the banks to unlock lending and for having increased bonuses and otherwise misused some of the funds.

But on balance TARP did its job in helping rescue the American financial system in its time of crisis.

The U.S. Treasury has released its 88 page White Paper(with a green cover) Financial Regulation Reform:A New Foundation which at first glance looks quite comprehensive. More on it after I have had a chance to read it carefully.