Rewarding Failure: Unintended Consequences of Bank Bailouts Mount

American taxpayers have pocketed a 10 percent return on bailing out banks that were dubbed "too big to fail" and have paid back their TARP funds, The WSJ reports, citing SNL Financial.

Hurray! Right? So why no cheers from our guest John Tamny, editor of RealClearMarkets.com?

"No, we shouldn't be celebrating this...banks are too important to be bailed out," Tamny says. "Big surprise that the government got some of its money back saving banks that should have been allowed to die. There's going to be a natural return there, but it shouldn't have happened."  

Instead of letting capitalism run it's course, Tamny notes we've entered a vicious cycle of baiilout's unintended consequences. Exhibit A: Banks deemed "too big to fail" have in fact grown larger and even more interconnected, The Washington Post reports.

Meanwhile, there's more bad banking news and no signs of more transparency:

• FDIC's watch list of banks rose more than a third in the second quarter. Plus, the agency's deposit insurance fund, which protects up to $250,000 per account at roughly 8,100 institutions, slipped 20 percent in the second quarter to $10.4 billion.
• The Fed is staying mum on which banks have tapped into their special programs, Reuters reports. "I think it's unconstitutional that there's an entity, the Fed, that can do something behind closed doors," Tamny says. "As taxpayers it's our right to know whose coming and tapping this money."  Meanwhile, Tamny doubts whether Congress really wants the responsibility associated with a possible audit of the Fed.

So nearly one year after Lehman's collapse, it seems like we're getting the same old song and dance from Washington D.C. and Wall Street.