US Government Makes $25 Billion on Bank Bailouts

[Toro]

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than yields paid on 30- year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit. Investing in the stock market or gold would have paid off better.

When the government first announced its intention to plow funds into the nation’s banks in October 2008 to resuscitate the financial system, many expected it to lose hundreds of billions of dollars. Two years later TARP’s bank and insurance investments have made money, and about two-thirds of the funds have been paid back. Yet Democrats are struggling to turn those gains into political capital, and the indirect costs of propping up banks could have longer-term consequences for the economy.

“From the perspective of the taxpayers getting their money back, TARP has been a great success,” said Todd Petzel, chief investment officer at New York-based Offit Capital Advisors LLC, which has more than $5 billion of assets under management. “But there are other costs as the government made it possible for the banks to pay back TARP. Those costs can turn out to be larger, and their legacy could last longer.”

Bank Bailout Returns 8.2% Beating Treasury Yields (Update1) - Bloomberg.com

 

[Revere]

They enabled those firms to clean out their private stakeholders.

 

[CrusaderFrank]

Fannie and Freddie don't count?

 

[loosecannon]

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than yields paid on 30- year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit. Investing in the stock market or gold would have paid off better.

When the government first announced its intention to plow funds into the nation’s banks in October 2008 to resuscitate the financial system, many expected it to lose hundreds of billions of dollars. Two years later TARP’s bank and insurance investments have made money, and about two-thirds of the funds have been paid back. Yet Democrats are struggling to turn those gains into political capital, and the indirect costs of propping up banks could have longer-term consequences for the economy.

“From the perspective of the taxpayers getting their money back, TARP has been a great success,” said Todd Petzel, chief investment officer at New York-based Offit Capital Advisors LLC, which has more than $5 billion of assets under management. “But there are other costs as the government made it possible for the banks to pay back TARP. Those costs can turn out to be larger, and their legacy could last longer.”

Bank Bailout Returns 8.2% Beating Treasury Yields (Update1) - Bloomberg.com

Tell that to Freddie and Sally and Fannie, and AIG.

 

[loosecannon]

Fannie and Freddie don't count?

you beat me to it.

 

[uscitizen]

So just like that 25 billion profit? From whom? Money has to come from somebody.
Or is that a bogus only exists on paper thing?

 

[Revere]

Yeah, the stakeholders who were raped when traditional bankruptcy rules were trashed by the White House.

 

[Toro]

So just like that 25 billion profit? From whom? Money has to come from somebody.
Or is that a bogus only exists on paper thing?

It comes from dividends and interest received and capital gains from the sale of company securities.

 

[uscitizen]

I still get the feeling that this is not the entire TARP picture. Just on a particular category or something?

 

[loosecannon]

So just like that 25 billion profit? From whom? Money has to come from somebody.
Or is that a bogus only exists on paper thing?

It comes from dividends and interest received and capital gains from the sale of company securities.

a whole bunch of it came from the feds turning a blind eye while the big banks scammed the stock market with robotrading bots.

GS made $100 million/day for 87 of 91 days in Q1 2010.

 

[loosecannon]

I still get the feeling that this is not the entire TARP picture. Just on a particular category or something?

Well it leaves out almost a trillion thrown out to save AIG, Fannie and Freddie who in actuality are covering loses they realized by trading derivatives with the TARP banks.

 

[Toro]

So just like that 25 billion profit? From whom? Money has to come from somebody.
Or is that a bogus only exists on paper thing?

It comes from dividends and interest received and capital gains from the sale of company securities.

a whole bunch of it came from the feds turning a blind eye while the big banks scammed the stock market with robotrading bots.

GS made $100 million/day for 87 of 91 days in Q1 2010.

That's a small portion of total profits, though I wouldn't disagree necessarily. However, government is turning much more of a blind eye in pretend-and-extend on the loan book.

But if you think the market is highly efficient, the market should see right through that. But its not. So either the market is wrong and inefficient or the market is right and the banks are getting better.

 

[Revere]

They were able to discard massive liabilities to stakeholders.

Government pushed them out of the way.

 

[loosecannon]

They were able to discard massive liabilities to stakeholders.

Government pushed them out of the way.

specifically they were allowed to use worthless MBS as reserves or sell them directly to the fed.

This is pretty much the definition of rinse and repeat.

 

[CrusaderFrank]

They were able to discard massive liabilities to stakeholders.

Government pushed them out of the way.

Fucking the senior secured creditors boosts the ROI's, I don't know how other people haven't thought of that!?

 

[loosecannon]

They were able to discard massive liabilities to stakeholders.

Government pushed them out of the way.

Fucking the senior secured creditors boosts the ROI's, I don't know how other people haven't thought of that!?

The sad part is that I remember a few years earlier when all three of the big three were feeling a squeeze and all three had to reach out to somebody for loans to help they stay afloat. Ford actually used itself as collateral.

But the banks came thru, extended them credit and they were doing OK until the recession.

Will banks take big risks in a similar situation in the future if they know that they can be shortchanged by a legal end around? I sure as hell wouldn't.

But then again the Feds saved the banks, bought their bad assets, lent them free money so they could invest and recoup their balance sheets and build their reserves off the federal dime. The feds took big losses on Fannie, Freddie, AIG so the banks would be made whole at $1 on the $ for their CDS with F, F and AIG.

The feds did everything that the banks needed to gift them with a new lease on life. Until the feds tried to clawback bonuses. Then the banks got pissy.

What's a few billion in secured credit between frins after all they have been thru together?

 

[asterism]

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than yields paid on 30- year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit. Investing in the stock market or gold would have paid off better.

When the government first announced its intention to plow funds into the nation’s banks in October 2008 to resuscitate the financial system, many expected it to lose hundreds of billions of dollars. Two years later TARP’s bank and insurance investments have made money, and about two-thirds of the funds have been paid back. Yet Democrats are struggling to turn those gains into political capital, and the indirect costs of propping up banks could have longer-term consequences for the economy.

“From the perspective of the taxpayers getting their money back, TARP has been a great success,” said Todd Petzel, chief investment officer at New York-based Offit Capital Advisors LLC, which has more than $5 billion of assets under management. “But there are other costs as the government made it possible for the banks to pay back TARP. Those costs can turn out to be larger, and their legacy could last longer.”

Bank Bailout Returns 8.2% Beating Treasury Yields (Update1) - Bloomberg.com

It's only counting some of the $787 Billion. Why is that?

I still get the feeling that this is not the entire TARP picture. Just on a particular category or something?

Of course.

It comes from dividends and interest received and capital gains from the sale of company securities.

a whole bunch of it came from the feds turning a blind eye while the big banks scammed the stock market with robotrading bots.

GS made $100 million/day for 87 of 91 days in Q1 2010.

That's a small portion of total profits, though I wouldn't disagree necessarily. However, government is turning much more of a blind eye in pretend-and-extend on the loan book.

But if you think the market is highly efficient, the market should see right through that. But its not. So either the market is wrong and inefficient or the market is right and the banks are getting better.

The market has not adjusted to new regulations so it's not efficient in this short timeframe.

 

[loosecannon]

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies

It's only counting some of the $787 Billion. Why is that?

The article is only counting actual government stock stakes in banks and insurance companies, not complete government outlays to banks and insurance companies.

This seems impossible considering the governments 80% stake in AIG, but bank shares were plumbing the bottom of the barrel when the TARP leg was passed and implemented. They have recovered considerably and that is likely where the government managed to close the gap.

 

[asterism]

It's only counting some of the $787 Billion. Why is that?

The article is only counting actual government stock stakes in banks and insurance companies, not complete government outlays to banks and insurance companies.

This seems impossible considering the governments 80% stake in AIG, but bank shares were plumbing the bottom of the barrel when the TARP leg was passed and implemented. They have recovered considerably and that is likely where the government managed to close the gap.

Yet another case where the government posts misleading data.

$787 Billion out, $351 Billion is is a profit?

And they wonder why we commoners just don't think they are doing things correctly.

 

[Toro]

It's only counting some of the $787 Billion. Why is that?

Because I don't think all the $787 billion was used (though I could be wrong on that). For example, one program was called the public-private investment program, or P-PIP, which was supposed to use $100 billion in funds to buy toxic assets. But that program never really got off the ground, and I don't believe those funds were allocated elsewhere.

The estimates that I have heard is that ultimately, TARP will cost the US taxpayer $30 billion, but every time I hear an estimate, it keeps going down. I don't think the government should do another stimulus package nor another quantitative easing program, but $30 billion is a small cost to have kept us out of another Great Depression, which I believe was a near certainty had we not implemented TARP.