The last of the big banks to receive money from a federal government program will be paying it back soon. Yesterday Wells Fargo and Citigroup, the only remaining banks that haven’t paid back funds from the Troubled Asset Relief Fund (TARP), announced that they would do so.

Started under George W. Bush’s administration, TARP was viewed as necessary to stabilize a U.S. banking system which had been taking heavy losses largely due to subprime mortgage trouble and derivatives, which wrap those mortgages into debt which is then sold off as securities. At the end of 2008, the U.S. Treasury Department met with big banks such as Bank of America, Wells, Citi, and JP Morgan Chase, and basically required the financial institutions to take government funds in order to shore up balance sheets.

What does this mean to our BankShout readers?

TARP improved the big banks’ capital ratios, which had been crushed by loan losses. The bank bailouts were tax-payer financed but also caused losses to bank stock shareholders. Although the TARP money didn’t really affect bank’s operations from a customer standpoint, it is still important for us to understand two key points about the bailouts. First is that once Wells and Citi have repaid their TARP money, the government will no longer be direct shareholders–an important point for many people who feel that Uncle Sam should not be in the business of  managing private companies. Second, the bailouts and the subsequent political fallout had the positive point of educating the general public about banking (even if the crisis obviously did nothing to improve bankers’ images).

I know that I for instance learned about the concept of moral hazard, which allows capitalists to take financial risks simply because the government will bail you out if you fail. Moral hazard will always be a danger. The banking crisis wasn’t pretty, but we as consumers (and voters) are much more educated for witnessing it.

Will a lot of people base their personal banking on what happened during the bailouts? Well, that remains to be seen. If you already had a checking account with, say, Bank of America, you probably didn’t switch to Chase just because Chase handled the banking crisis with relative ease. Big banks are big banks; customers want good service, functionality, and high rates on savings accounts. Yet the big boys of banking took a big hit during this mess. Customers wouldn’t be blamed for flocking to credit unions or hometown banks, both of which are smaller if not always safer.

So now that TARP is finally winding up, what is your opinion of the whole affair? What worked and didn’t work? Will something similar happen again? Feel free to comment below and thanks for reading.