Government Allows Banks to Repay Aid, But Move Not a Sign of Recovery, Experts Say

Published December 24, 2015

The White House plans to announce that some of the nation's largest banks can pay back billions in federal aid, but officials warn that such repayment is not evidence of economic recovery as the government continues to provide them with other forms of support, The Washington Post reported.

Independent experts reportedly caution that the government has created an artificial environment that is potentially habit-forming by providing cheap loans and debt guarantees -- allowing banks to rake in close to $50 billion from private investors.

The private funds have enabled some stronger banks to repay their government aid, but few have expressed a willingness to terminate other forms of support, and officials say the government's relationship with some of the largest banks -- like J.P. Morgan Chase and Goldman Sachs -- could enter into a risky phase, according to the newspaper.

"It's good from an individual investor point of view, it's great for the banks, but from a system point of view it's very dangerous," Simon Johnson, a Massachusetts Institute of Technology professor and former chief economist at the International Monetary Fund, told the newspaper.

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