I had my doubts about TARP but I am happy to be wrong if banks can get back on their feet quickly and the government make a tidy profit. There are still alot of things that could still go wrong but things look like they are going to work out. http://www.msnbc.msn.com/id/32623489/ns/business-the_new_york_times As banks repay bailout cash, U.S. sees a profit Early returns of 15 percent annually for TARP received as welcome surprise By Zachery Kouwe updated 3:55 a.m. CT, Mon., Aug 31, 2009 Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again. The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times. These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies. The article is relatively long so click on the link to see the rest of the article.
If AIG survives, they are still on the hook for it, so I would think it should eventually be paid back - though who knows how long that would take or if they will really survive. I believe something like half of GM's money is non-recoverable, while the other half would be paid back over time. The gov't currently owns most of GM, so I'm not sure how much / if anything the gov't gets if they go public again.
Is this saying we've made a profit on some of the individual banks we've loaned to, or that the whole TARP program has more money than it started with? I assume it is the former, in which case I'm underimpressed.
Yes - it's the former. Keep in mind, no one expected the gov't to have had any returns thus far (except the quarterly preferred dividends), so they are ahead of pace. There were four general groups of opinions when TARP was being debated: 1. We are throwing money at dead banks and wouldn't see a dime of it 2. It would cost a lot of money, but not quite $700B in the end 3. It would either cost a little or net a little money (this is where I was) 4. It would be hugely profitable for the gov't I think #1 has effectively been thrown out. The gov't has something like $350B of the cash on hand between money that was never distributed and money that'd been returned + profits. So unless they go out and spend that again in a 2nd great depression scenario, they are good there. #4 is not too likely simply because of the losses from GM, though who knows depending on if there's a net return when GM goes public. The main question remaining is between #2 and #3. A lot of that will depend on Bank of America and Citi - if they get on track and eventually pay back all their loans, it's likely to be #3. If they need more help or run into additional problems and can't pay back their money, it would be #2. AIG, I think, is not actually part of TARP since they were rescued in other ways before TARP was passed.
The banks like GS and such are the one who paid back the loans with interest when in fact they never wanted it in the first place. Meanwhile AIG, Citi and BOA, the 3 largest recpients of TARP aid are still facing major fiancial issues and likely never to payback the money barring a miracle turnaround. So in short TARP is still the largest handout of free money in American history. This idea of making profit on TARP is just as misleading as the Wall Street brokers who tells you that your stocks made buck while your entire portfolio is still in the negative. Should you cheer or cry?
AIG's bailout, I believe, wasn' a part of TARP. BOA, and to a lesser extent Citi, are both expected to be profitable this year and going forward. What makes you think they are likely to never pay back the TARP money? Its certainly possible, but it doesn't seem the more likely scenario at this point.
Part of AIG's was within the TARP program and part of it wasn't (my stat shows 43 bb outstanding under TARP from them still)- but practically I don't see why we should keep two separate ledgers here given the interdependence between the two programs (coming from somebody who was generally in favor of TARP). If AIG fails then TARP also fails, in all likelihood.
I may be wrong, but I was under the impression that the AIG bailout wasn't done with an intent to recover the money, but simply to save the system - or at least, the first AIG bailout - I didn't realize they had gotten TARP money. So while it's all the same pool of money, the TARP was specifically debated in Congress (and here and elsewhere) as to what the ultimate cost would be. The initial AIG costs weren't included in that because I think most people thought most of that money was sunk. The original idea (I don't know if this has changed) was to stabilize AIG long enough to let them sell off all their units and essentially disband and pay the gov't whatever proceeds they could. But certainly when totalling up the TARP's costs and recovery, any additional bailout of AIG should be included. I don't know if there is an intent there to pay it back, but if not, then it certainly makes TARP more expensive or less profitable.
It mentions that BOA is profitable in the article and that the government has a paper profit from BOA.
Very misleading considering a large portion of banks have not paid back their loans, and doesn't discuss the interest the US pays on the debt they incurred. The banks that could have survived without TARP are the ones the US is getting money back from. What of the riskier banks? What about funding spent outside of TARP? How will the US relinquish partial ownership in many companies? At least they didn't flush $700 billion down the toilet. Only time will tell how much spending we will get back, and we may never know exactly how much it was/was not needed.
AIG survive? Looks like they are thriving: the stock has gone from like $7 bucks earlier this year to $44 a share today.
1. As others have said, only the healthier banks have paid back TARP. 2. The government could have made more money on these investments, but gave the banks really good deals. 3. The $700 billion TARP is only a small part of the bailout. All the other guarantees total in the several trillion dollar range.
On #2, that's true - but the purpose wasn't to maximize the profit for the gov't. The more profit the gov't makes, the more stress you're putting on the financial system, which is the opposite of the ultimate goal. The solution they came up with was win-win for the banks and the taxpayers (potentially). If they came up with more of a win to the taxpayers, then you have more of a loss for the banks, which just causes more economic turmoil. On #3, also true - but none of that money has been spent and isn't likely to be spent unless all hell breaks loose. So the total actual cost of that as of today is $0.
Their stock price hasn't gone up because the company is thriving. The stock price has gone up because they did a 1-for-20 stock merge.
I always thought TARP was needed even though I hated the idea of it. If we get 90 percent of it back, that would mean we only lose 70 billion which would only be a drop in the bucket considering it saved our economy from a total collapse. I somehow doubt we will get that much back though considering a huge part of it went to AIG.
