WAPO TARP Logic: If it Issues a Mortgage at 1 Percent Interest, and the Mortgage is Repaid, Then It Has Made a Profit

In an editorial on President Obama's proposed bank tax, the Washington Post claimed that the country made a profit on its TARP loans. This claim is only true if we consider the interest on a below market loan to be a profit.

The TARP involved loans of hundreds of billions of dollars to banks at interest rates that were far below what they would have been forced to make in the market at the time. The Fed lent far more money to the banks through its special lending facilities.

The access to...