May the Odds be in Your Favor...

TARP: End of an error

Ten big (and mostly healthy) banks are finally being allowed to pay taxpayers back $68 billion in TARP funds. What do you mean being allowed. Whose permission should they need to pay back MY money I did not want to give to them from JUMP???

By Paul R. La Monica, CNNMoney.com editor at large

Last Updated: June 9, 2009: 1:57 PM ET

What does the payback of TARP funds by 10 major banks mean for the economy?

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      A recovery is underway

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      It means little; too many banks are still in trouble

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      It's too soon to tell

NEW YORK (CNNMoney.com) -- Good riddance, TARP. It was nice knowing you.

Okay, the Treasury Department's controversial Troubled Asset Relief Program isn't exactly dead yet. But by finally letting 10 of the nation's largest financial firms return bailout funds, the Treasury is undoing one of the worst aspects of TARP.

Several of the banks that received money in the panic last fall didn't really need it.

But by all accounts, then Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke did their best to convince some of the nation's healthier banks, including JPMorgan Chase (JPM, Fortune 500) and Bank of New York Mellon (BK, Fortune 500), to take one for the team.

Some banks didn't want to be viewed by investors as "troubled" enough to qualify for something called the Troubled Asset Relief Program.

But Paulson and others in Washington were apparently concerned that if TARP was only given to banks truly in dire need, the markets would freak out and punish those banks severely. (Coffee's for closers, TARP's for losers.)

That backfired big time. Instead of penalizing only the weak banks, such as Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), investors dumped shares of all banks.

Wall Street quickly came to the wrong conclusion that the entire banking system was on the verge of being insolvent. Short sellers sold bank stocks first and asked questions later.