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A Sunday report in The Wall Street Journal found that 98 banks that had received bailout funds from the Troubled Asset Relief Program are in danger of failing. The news comes at the end of a troubled public-relations year for TARP, which remains an object of popular ire despite some high-profiledefenders. What do these findings mean, and what conclusions can we draw from them?

Number of Distressed Banks Is Up The Journal notes that "the total, based on an analysis of third-quarter financial results... is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators." The piece goes on to say that "when TARP was created in the heat of the financial crisis, government officials said it would help only healthy banks. The depth of today's problems for some of the institutions, however, suggests that a number of them were in parlous shape from the beginning."

Most of Them Aren't That Big, Though The Journal also reports that while "the 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department... most of the troubled TARP recipients are small, plagued by wayward lending programs from which they might not recover. The median size of the 98 banks was $439 million in assets as of Sept. 30. The median TARP infusion for each was $10 million."

Great, That's a Few Billion Down the Drain "There are many many reasons not to bail out failed banks: Moral Hazard, rewarding the incompetent, thwarting legitimate competition, reducing incentives to be risk averse," writes Barry Ritholtz at The Big Picture. "We can add another to the list: Throwing away billions of dollars."

Meanwhile, the Remaining Banks Get More Bloated Noting that "most of these failures will be relatively small ones," blogger Mike Shedlock goes on to say that "one consequence of these failures is the too big to fail banks keep getting bigger ... Anything too big or too interwoven to fail, is simply too big."

Hang On a Second Mark Blyth, a professor at Brown University quoted in The Huffington Post, says we shouldn't jump to dire conclusions. "If Citibank and Bank of America were going under, that would be a problem," Blyth is quoted as saying. "The bailout was meant to deal with a global systemic crisis. It was not to make sure that some bank in Utah with dodgy commercial real estate would be okay." Blyth also suggests that the reason "people aren't borrowing" is "because they're up to their eyeballs in debt."

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