In olden times, if you got too far in debt to pay back your loan, you would get thrown in prison and would not be let out until you paid the uttermost farthing. Of course, it was difficult to generate enough income to come up with those farthings while you were in prison.
To some people this system seemed counterproductive if not unjust. It motivated them to come up with a better method, such as bankruptcy court.
But now the Obama administration is taking us back to the older ways.
According to Monday’s WSJ, Citigroup and Wells Fargo would like to get out of the Trouble Asset Relief Program. They have money to pay back the taxpayer money that had been loaned to them. But the government likes having those companies in its debt. In this case the uttermost farthing consists of about $20 billion more than they even owed. The government won’t let them pay back the money unless they also raise $20 billion in common stock. Of course, it’s hard to raise that kind of money while you’re in prison. Who wants to invest in Citigroup and Wells Fargo when they’re operating under the government’s thumb? So, as the article says, “Disagreements over capital-raising mean Citigroup is unlikely to repay its TARP investment in the foreseeable future….”