Estimated TARP losses reduced to $50-66b; could break even

[Trajan]

The one thing that gets lost in all this is the massive cost of moral hazard. As stunning as this may sound IMHO there has been very little change on Wall Street. I have little doubt that we will be in another massive banking crisis within 20 years if not sooner.

The other massive cost has been that these policies are laying the groundwork for future inflation. $700 billion will look like a drop in the bucket if inflation reignites.

agreed. its not so much that they did it, but the construct is there and the groundwork laid to make a perfectly efficable choice next time.

Inexorably we will move from -necessary, very rare, sometime(s)....then often...

 

[Dick Tuck]

The one thing that gets lost in all this is the massive cost of moral hazard. As stunning as this may sound IMHO there has been very little change on Wall Street. I have little doubt that we will be in another massive banking crisis within 20 years if not sooner.

The other massive cost has been that these policies are laying the groundwork for future inflation. $700 billion will look like a drop in the bucket if inflation reignites.

Yep, I'm sure we'll have another Wall Street inspired crisis, and change the laws again, and slowly lull ourselves into the illusion that they've learned their lesson and once again begin to deregulate. It's always been like that. Yet the moral hazard is still there, and the fat cats from Lehman, Bear, etc. lost their asses. But you're right, it doesn't matter, smart money people will find away to exploit the system, and we the people will need to bail them out once again, or face worse consequences.

 

[Care4all]

And as soon as team Obama took the WH they changed the rules of the game pissing off the banks who felt like they had been sucker punched. They proceeded to repay tarp loans as fast as possible to eliminate the authority that being on the hook for those loans gave team Obama over their salaries and business practices.

Ask any banker; under Bush TARP was a bailout, under Obama it became a Trojan Horse.

Obama was pretty smart to light a fire under the feet of those TARP recipients. It's amazing how fast they want to pay the taxpayer back since Obama converted non-voting preferred shares to voting stock. Yet, it had the right wings' panties in a collective wad, with shouts of Obama's secret socialist plan to take over industry.

I also think there was enough "moral hazard" fear in the bailout, between Bear Sterns failing, and Lehman Brothers being gobbled up for chump change.

Good point. So maybe a way to reduce the moral hazard of bailouts is to attach a bunch of inconvenient strings to the package, making a bailout so unattractive to the recipient that bankruptcy would seem the better option.

Yes, I think so.

 

[Sheldon]

TARP was an essentially bipartisan piece of legislation, in that it was crafted by the Bush administration, supported by both Democrats and many Republicans, then taken over by the Obama administration.

The anger against it, paradoxically, takes no heed of the fact that TARP, along with the broader government rescue efforts, has been arguably a success. It will ultimately cost far less than the initial $700 billion price tag that stunned a nation. Major banks are profitable and can raise capital. Credit spreads—a key measurement of risk—are down to pre-crisis levels.

The White House now projects TARP will lose at most $50 billion, down from $105 billion projected earlier this year. Privately, Treasury Department officials say the U.S. may not lose a dime, and could ultimately make money depending on how some investments fare, in particular American International Group Inc. and General Motors Corp. In a $14 trillion economy, $50 billion is less than 1% of economic output.

"The incredible irony here is that TARP probably succeeded wildly beyond anybody's imagination," said Alan Blinder, a Princeton University economist who co-authored a paper crediting the administration's economic policies with preventing a second Great Depression. "Suppose the original TARP bill had been to spend $50 billion to avert a catastrophe. Would anyone have blinked?"

Bailout Ends, Not Anger - WSJ.com

thx..

the money shot imho-

TARP now appears in numerous GOP campaign commercials being run against Democrats, usually lumped in with the stimulus package and the health-care revamp as examples of government overreach. In Texas, Gov. Rick Perry repeatedly referred to Sen. Kay Bailey Hutchison, who was challenging him for the Republican nomination, as Kay "Bailout" Hutchison.

Yep.

TARP was designed to keep the banking industry afloat. It's done that, and now with a possibility of breaking even or even being profitable, I think it can be considered a success. It could be the most effective and efficient $700b government program in the past two administrations.

But the whole principle of moral hazard it represents is unattractive to a lot of voters, including me, that even its success is not much of positive campaign slogan. It's a smart political strategy for Republicans to exploit that, and tie it to the health-insurance reform and Stimulus package. Make it a simple and ugly trifecta.

 

[loosecannon]

Obama was pretty smart to light a fire under the feet of those TARP recipients. It's amazing how fast they want to pay the taxpayer back since Obama converted non-voting preferred shares to voting stock. Yet, it had the right wings' panties in a collective wad, with shouts of Obama's secret socialist plan to take over industry.

What Obama did was legally wrong, and amounted to breach of contract. It reinforced an idea central to the US globally. It said to the world that America's word is not bound by law and is only as good as it's current leadership.

BUT it actually did force TARP to be wound down quickly with few losses YET to the taxpayer.

But we still don't know when AIG is gonna be solvent or how many more bailouts they may need.

Some firms ended up subsidizing the loses of others.

What court found Obama's actions to be legally wrong? What Obama did was enact the laws passed by congress.

what Obama did was to change the rules after banks had signed onto the program. This is called bait and switch in retail, and breach of contract under contract law. He did the same to the secured bond holders of the failing big 3 and to BP.

Do the ends justify the means if you have to break the law to reach them? Isn't that question the hallmark divining question separating law abiding from criminal?

 

[loosecannon]

TARP was designed to keep the banking industry afloat. It's done that

that is a pov, but as Toro eluded above, not much changed. Including the existing hazards that created the brink of meltdown for the banking sector. Derivatives specifically and giant leverage risks.

Just reading the commentary above it sounds more like TARP did nothing but keep the banking industry afloat TODAY while almost assuring it faces similar crisis in the future.

In a capitalist system failing banks would fail and serve as educational devices for the next gen of MBAs. At the very least systemic risk should be dismantled now that the crisis point has passed. But since the crisis was never realized....how do we really know there was a true crisis? Can we rely on the word of the econ community who never saw it coming in the first place? Or the regulators whose job it was to prevent it?

 

[Sheldon]

TARP was designed to keep the banking industry afloat. It's done that

that is a pov, but as Toro eluded above, not much changed. Including the existing hazards that created the brink of meltdown for the banking sector. Derivatives specifically and giant leverage risks.

Just reading the commentary above it sounds more like TARP did nothing but keep the banking industry afloat TODAY while almost assuring it faces similar crisis in the future.

In a capitalist system failing banks would fail and serve as educational devices for the next gen of MBAs. At the very least systemic risk should be dismantled now that the crisis point has passed. But since the crisis was never realized....how do we really know there was a true crisis? Can we rely on the word of the econ community who never saw it coming in the first place? Or the regulators whose job it was to prevent it?

Banks seem to have "issues" every twenty years or so. No matter what. I don't think bailouts or any set regulations will fundamentally break that cycle.

I'm barely literate when it comes to economics. So if economists from different schools are all saying the same thing, I'll take their word. Sheeple mentality at its finest.

that is a pov, but as Toro eluded above, not much changed.

But wasn't that the point of TARP? Keep the industry afloat, keeping the same banks at the top; minimize the changes that a true purging of the market would have made.

 

[Toro]

TARP was designed to keep the banking industry afloat. It's done that

that is a pov, but as Toro eluded above, not much changed. Including the existing hazards that created the brink of meltdown for the banking sector. Derivatives specifically and giant leverage risks.

Just reading the commentary above it sounds more like TARP did nothing but keep the banking industry afloat TODAY while almost assuring it faces similar crisis in the future.

In a capitalist system failing banks would fail and serve as educational devices for the next gen of MBAs. At the very least systemic risk should be dismantled now that the crisis point has passed. But since the crisis was never realized....how do we really know there was a true crisis? Can we rely on the word of the econ community who never saw it coming in the first place? Or the regulators whose job it was to prevent it?

I agree that TARP was designed to keep the banking system from collapsing. But it has introduced massive moral hazard. And faced with the prospect of another similar collapse, I believe that the lawmakers would do it all over again, whatever they may say on the campaign trail today.

As much as I hated it, I believe that the economy would have been far, far worse had TARP not been enacted.

 

[loosecannon]

For a while. But in the long run the economy may have been far better off if things were allowed to proceed and demand correction.

 

[loosecannon]

TARP was designed to keep the banking industry afloat. It's done that

that is a pov, but as Toro eluded above, not much changed. Including the existing hazards that created the brink of meltdown for the banking sector. Derivatives specifically and giant leverage risks.

Just reading the commentary above it sounds more like TARP did nothing but keep the banking industry afloat TODAY while almost assuring it faces similar crisis in the future.

In a capitalist system failing banks would fail and serve as educational devices for the next gen of MBAs. At the very least systemic risk should be dismantled now that the crisis point has passed. But since the crisis was never realized....how do we really know there was a true crisis? Can we rely on the word of the econ community who never saw it coming in the first place? Or the regulators whose job it was to prevent it?

Banks seem to have "issues" every twenty years or so. No matter what. I don't think bailouts or any set regulations will fundamentally break that cycle.

I'm barely literate when it comes to economics. So if economists from different schools are all saying the same thing, I'll take their word. Sheeple mentality at its finest.

that is a pov, but as Toro eluded above, not much changed.

But wasn't that the point of TARP? Keep the industry afloat, keeping the same banks at the top; minimize the changes that a true purging of the market would have made.

argue for the status quo and it is yours!

 

[Toro]

For a while. But in the long run the economy may have been far better off if things were allowed to proceed and demand correction.

Yeah maybe

 

[rdean]

that is a different stimulus than The American Recovery and Reinvestment Act of 2009 — President Obama's $787 billion stimulus
Recovery Act: How Obama's Stimulus Is Changing America - TIME

altho it was a stimulus and he did sign it 6 months before the election. It was only $168 billion.

Neither was big enough.

Republicans, for some odd reason, believe "tax cuts" work. Bush passed a 2.4 trillion dollar tax cut, over 52% went to the top 1% of Americans, and what happened to the economy?

It seemed to work for a minute. Because those companies that received all that money, brought Chinese and Indians over here to learn American jobs from the very Americans they were replacing. Once they learned those jobs, they were moved to those countries where workers could be paid 100 dollars a month.

To add insult to injury, Republicans made sure those companies were given subsidies.

That's right, Americans had to train the very people who were taking their jobs. How do I know? It happened at the company I worked at. Imagine getting paid to teach Chinese who go back to their country and wait for your job.

This is why Republicans fight Obama because he wants to fix it. I sincerely believe they just don't like him because he is black. It's why they call him Muslim and Terrorist and Marxist and Communist and Fascist and say he wasn't born here. They want to make him, "Not one of us".

Republicans want to vote back into office the very people who destroyed the economy.

Let me ask, "Do Republicans feel Americans should be making 100 dollars a month without any benefits or days off?" Because it seems like they do.

The right complains about Obama working to fix their mess, but make no complaints about what happened to create their mess.

No one answered about Imagine getting paid to teach Chinese who go back to their country and wait for your job.

It's like they don't care.

 

[loosecannon]

Yeah, I keep waiting for Obama to give a shit.

 

[Sheldon]

that is a pov, but as Toro eluded above, not much changed. Including the existing hazards that created the brink of meltdown for the banking sector. Derivatives specifically and giant leverage risks.

Just reading the commentary above it sounds more like TARP did nothing but keep the banking industry afloat TODAY while almost assuring it faces similar crisis in the future.

In a capitalist system failing banks would fail and serve as educational devices for the next gen of MBAs. At the very least systemic risk should be dismantled now that the crisis point has passed. But since the crisis was never realized....how do we really know there was a true crisis? Can we rely on the word of the econ community who never saw it coming in the first place? Or the regulators whose job it was to prevent it?

Banks seem to have "issues" every twenty years or so. No matter what. I don't think bailouts or any set regulations will fundamentally break that cycle.

I'm barely literate when it comes to economics. So if economists from different schools are all saying the same thing, I'll take their word. Sheeple mentality at its finest.

that is a pov, but as Toro eluded above, not much changed.

But wasn't that the point of TARP? Keep the industry afloat, keeping the same banks at the top; minimize the changes that a true purging of the market would have made.

argue for the status quo and it is yours!

I'm not really arguing for the status quo but maybe it's coming across that way. No fan of GS here. I'm arguing that TARP was successful in its objective--for good or bad in the long run--because the financial sector is relatively intact today, at little to possibly no cost to the taxpayer.

The program would definitely have been a failure if the sector was still collapsing right now. But since it isn't, then there's a reasonable argument that TARP was a major factor in preventing that further collapse. It's ultimately based on speculation, like the counter-argument. So I guess it comes down to ideological head-butting.

 

[william the wie]

Next year or later this year TARP and the Obama stimulus will get severely challenged as about $12 T is pending and completed foreclosures get resolved by the state courts. Somebody most likely foreign banks are going to get the biggest haircut in history.

 

[code1211]

disincentive?

I think you can thank Team Obama for this result.

Without going and looking it up, I thought Tarp and the Stimulus were the last things Bush did as President. The ONLY two things he did that worked.

8 years of failure and the only two things he did that worked are hated by his base.

You're half right. He initiated the TARP. The Failed Stimulus is completely of the Big 0.

The TARP did work to do what it was intended to do which was stabalize the financial industry even though it was almost immediately changed after the funds were approved.

The TARP was initially thought to be something that could and would be repaid. The Failed Stimulus was supposed to keep unemployment below 8% (failed), save or create 3 to 4 million jobs (failed) and through the immediate dispersement of most of the funds (failed) create a robust and growing economy (failed).

The TARP was a misrepresentation, but in effect did what it was supposed to do. The Failed Stimulus was a swindle that only provided bribes, paybacks and payoffs for the slimy and decietful cronies of this corrupt administration.

 

[code1211]

Without going and looking it up, I thought Tarp and the Stimulus were the last things Bush did as President. The ONLY two things he did that worked.

The stimulus was the new Dem Majority's first move upon taking the WH. It was a pork bonanza masquerading as a recovery initiative.

You made me go look it up. Why couldn't you?

=================================

Bush signs stimulus package into law

WASHINGTON — President Bush on Wednesday signed a multibillion-dollar economic rescue package on Wednesday that means $300 to $1,200 rebates for many American households.

Bush called the measure "a booster shot for our economy" to stave off a recession.

Bush signs stimulus package into law - Business - Stocks & economy - msnbc.com

I guess Bush was the only Republican who didn't want the country to fail. He only started his schemes because in his limited imagination, they worked. Funny, the last two did.

The Stimulus that you cite was signed in Febuary of 2008. The Failed Stimulus of the Big 0 was a year later. Are you intentionally trying to decieve, that is lying, or do you really not know the difference?

 

[code1211]

that is a different stimulus than The American Recovery and Reinvestment Act of 2009 — President Obama's $787 billion stimulus
Recovery Act: How Obama's Stimulus Is Changing America - TIME

altho it was a stimulus and he did sign it 6 months before the election. It was only $168 billion.

Neither was big enough.

Republicans, for some odd reason, believe "tax cuts" work. Bush passed a 2.4 trillion dollar tax cut, over 52% went to the top 1% of Americans, and what happened to the economy?

It seemed to work for a minute. Because those companies that received all that money, brought Chinese and Indians over here to learn American jobs from the very Americans they were replacing. Once they learned those jobs, they were moved to those countries where workers could be paid 100 dollars a month.
To add insult to injury, Republicans made sure those companies were given subsidies.

<snip>

.

Now that all of that horrible stuff has ended, how many of the new jobs have been brought back by the enlightened policies of the Big 0?

Please demonstrate this gain in view of the roughly 5 million jobs that have evaporated since the Big 0 started his enlightened policies.

 

[code1211]

Obama was pretty smart to light a fire under the feet of those TARP recipients. It's amazing how fast they want to pay the taxpayer back since Obama converted non-voting preferred shares to voting stock. Yet, it had the right wings' panties in a collective wad, with shouts of Obama's secret socialist plan to take over industry.

What Obama did was legally wrong, and amounted to breach of contract. It reinforced an idea central to the US globally. It said to the world that America's word is not bound by law and is only as good as it's current leadership.

BUT it actually did force TARP to be wound down quickly with few losses YET to the taxpayer.

But we still don't know when AIG is gonna be solvent or how many more bailouts they may need.

Some firms ended up subsidizing the loses of others.

In the normal functioning of the market, businesses grow and businesses shrink. If the busijness in questin goes out of business, its customers continue to buy and, usually, another company buys the defuct entity.

Subsidizing the losses of failed companies is what successful companies do in this process.

 

[rdean]

The stimulus was the new Dem Majority's first move upon taking the WH. It was a pork bonanza masquerading as a recovery initiative.

You made me go look it up. Why couldn't you?

=================================

Bush signs stimulus package into law

WASHINGTON — President Bush on Wednesday signed a multibillion-dollar economic rescue package on Wednesday that means $300 to $1,200 rebates for many American households.

Bush called the measure "a booster shot for our economy" to stave off a recession.

Bush signs stimulus package into law - Business - Stocks & economy - msnbc.com

I guess Bush was the only Republican who didn't want the country to fail. He only started his schemes because in his limited imagination, they worked. Funny, the last two did.

The Stimulus that you cite was signed in Febuary of 2008. The Failed Stimulus of the Big 0 was a year later. Are you intentionally trying to decieve, that is lying, or do you really not know the difference?

Bush's succeeded but Obama's failed?