Follow the Money

" The congressional oversight panel released its latest report into the fate of the TARP funds."

" And more importantly your taxpayer dollars -- the chair of the congressional oversight panel Elizabeth Warren thanks see you back on the show is that. It's good being here all right so help us in layman's terms understand what this report says the latest information about our TARP money."

" All right so this is the reminders that what we all talked about when TARP was passed and when the treasury first started spending money. Was that the government got lots of tools treasury got lots of tools and mostly we focused on what we call capital infusion where -- put money directly into banks. But lying in the background was the fact that treasury did lots of guarantees. As well. And in fact in terms of dollars -- guarantees turn out to be the bigger part of the response. To the financial crisis so this report is about those guarantees. What do you mean by the guarantees as far as how the taxpayers concerned. Well so on the taxpayer concerns we've got news we've got some good news. That is that the guarantees had the effect of calming the markets we came in with guaranteed money market funds. We guarantee bank loans and then when Citi and Bank of America got it just so much trouble we guarantee the value of their assets. All together at the peak -- nominal value of the guarantees were about four point three trillion dollars. It calmed the markets ultimately it didn't so far cost this much and we may actually turn a profit. However and this is really the point -- the report it had to really powerful effects. It was a whole lot of risk we took an enormous amount of risk and the second is. It distorts pricing in the marketplace these guarantees do and they create a lot of moral -- that's what the reports about it."

" what what we're just little bit short on time but your view is that these guarantees overtime. Are bad for the market because they create artificial conditions they're really not good for our economy."

" what they really do think about it this way if you have to financial institutions let's just say for example -- really big and has an implicit guarantee you like too big to fail. And the other ones not. The first one can get capital cheaper than the other so it gets a real comparative advantage -- Another way in which guarantees to store is with this moral hazard. So if -- backed up by guarantee. I'm gonna draw the extreme. You can say -- listen here's my business plan give me a lot of money. All go to Vegas betting all on red 22 exactly and if it comes up red twenty -- we're all rich right and if it doesn't know what the tax -- make up the exactly and that's what happened and that's why Wall Street heading -- forty per."