"But, But-- the Admnistration is getting all our bailout money back! They are loans!"

[Political Heretic]

How's that working out so far:



http://www.propublica.org/ion/bailout/item/your-bailout-update-nov.-2009-400-billion-outstanding-1103

Don't let sporadic stories about some companies returning or planning to repay TARP money delude the truth of where we stand today.

Bailout: $15 Billion More to Fannie Mae (and More to Come)
http://www.propublica.org/ion/bailout/item/bailout-15-billion-more-to-fannie-mae-1106

Bank Failure Friday Fells a ‘Healthy Bank’ Bailout Recipient (last friday)
http://www.propublica.org/ion/bailout/item/bank-failure-friday-fells-tarp-recipient-1107

[Teaser]

1. Not bad so far

.

[KG]

2. Thank Gawd It Passed!

:eyes:

[SammyWinstonJack]

6. +1

:evilgrin:

[msongs]

3. do what banks do - take all their property and assets and sell them to highest bidder nt

[HamdenRice]

12. That's what the FDIC DOES do to failed banks nt

[MiniMe]

4. The bailout was $563b, part of the chart seems to be missing

What happened to the other $163b? Not that it is a great showing so far, but that chart doesn't show everything.

[Political Heretic]

7. It's showing what has been distributed to date

[HamdenRice]

11. $163 billion would be the amount paid back, but it's not accounted for as revenue in banking

If I lend you $200 for one year at 5%, and at the end of the year, you pay me $10 in interest and repay $100 of the principal, my "revenue" is only $10. The $100 is a partial return of the principal; it's not money I "made" on the deal, it's money I started with.

So the $14 billion is purely income on the outstanding balances. The $163 billion is principal safely returned to the Treasury.

The $14 billion is dividends on TARP preferred stock, and profits the Treasury made on warrants issued by TARP banks to the Treasury.

Warrants are a sort of almost derivative-like thing that a corporation can issue, which allows the warrant holder to buy stock at a set price. It's a bet that the stock price will go up. Because the banks were on the verge of bankruptcy, their stocks were worth very little -- iirc, Citibank was trading at a dollar or two a share. They issued warrants to the government to buy their stocks at cheap prices. So for example, if the warrant price is $2, when the share prices recovered to say $10, the government could say, you have to sell me shares at $2 (the distress price), and I can turn around and sell them to the public for what they're worth now, $10 and pocket the difference, $8. In practice, however, the banks buy the warrants back at $8. It's a way of taking back value from the shareholders, whose butts were about to be wiped out when the shares recover (it's called dilution of the shares). One of the worst things Geithner has done is give the banks sweetheart deals on the warrants.

The OPer left a lot out of the story at the link. For example, the authors state that the $2.33 billion loss was all from only one TARP recipient, CIT the commercial lender that went bankrupt a few weeks ago (not to be confused with Citibank):

After CIT’s bankruptcy filing earlier this week, we’re setting the amount lost so far at $2.33 billion <5>. No other TARP investments fit in that category, although taxpayers seem likely to eventually take heavy losses from the bailout of the auto industry <6>. The former chief of the auto task force said last month <7> that $20 billion of the $50 billion given to GM <8> probably won’t be coming back.

Even this paragraph is a bit confusing because the auto bailout was not part of TARP.

[girl gone mad]

14. Yes, the auto bailout was a part of TARP.

WASHINGTON - Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

"I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."

The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.

For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.

Treasury Department officials have acknowledged that most of the $23 billion provided by the Bush administration is likely to be lost. But Meg Reilly, a department spokeswoman, said there is a "reasonably high probability of the return of most or all of the government funding" that was provided to assist GM and Chrysler with their restructurings.

(snip)

The Congressional Oversight Panel was created as part of the Troubled Asset Relief Program, or TARP. It is designed to provide an additional layer of oversight, beyond the Special Inspector General for the TARP and regular audits by the Government Accountability Office.

The panel's report recommends that the Treasury Department consider placing its auto company holdings into an independent trust, to avoid any "conflicts of interest."

The report also recommends the department perform a legal analysis of its decision to provide TARP funds to GM and Chrysler, their financing arms and many auto parts suppliers. Some critics say the law creating TARP didn't allow for such funding.

[MiniMe]

18. OK, I understand what you are saying

But in my mind, the chart should show how much was lent out, how much was paid back, and then the other 2 columns. Because in reading what you posted, and looking at the chart posted, I got the impression that nothing had been paid back. So I think that part makes the charts shown incomplete.

[HamdenRice]

19. I agree, it provides an incomplete, somewhat misleading impression

:hi:

[bahrbearian]

5. Are they getting revenue from Failed Banks too,

Who is going to bail out the FDIC?

[rucky]

8. Bookmarked for future use in this forum. n/t

[HamdenRice]

9. 14.8 minus 2.3 equals 12.5 -- net profit so far

12.5 divided by 400 over one year is about a 3% rate of return -- not including saving the economy from complete collapse.*

No one said the feds would get "all" the money back from each and every borrower. They said that the TARP program (not Fanny, Freddie or AIG) is on course to make a net profit.

That doesn't mean getting "all" the money back from each institution that the feds invested in; it means that as a portfolio, when you net gains and losses the gains are on course to be larger than the losses.

I can't think of any portfolio manager in history, including Warren Buffet, who didn't have to net gains against some losses.

*Actual rate of return calculations would be complicated by amounts that have already been paid back.

[Orsino]

10. My bank gave me thirty years to repay the loan on my house.

How fast did we expect banks to turn huge deficits around? :shrug:

[Statistical]

13. So roughly 1/4 has been paid back and revenue exceeds losses.

Most people would consider that a performing loan.

[girl gone mad]

16. Way to not comprehend facts.

We now return our readers to the reality based community:

"Nov. 12 (Bloomberg) -- Neil Barofsky, the federal watchdog for the $700 billion financial industry bailout, said the program will “almost certainly” result in a loss to U.S. taxpayers.

“We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic,” he said today at the Bloomberg Washington Summit. “It’s almost certainly going to be a loss.”

Barofsky, the special inspector general charged by Congress with policing the Troubled Asset Relief Program, also said he’s conducting 65 investigations of possible fraud. The former federal prosecutor has pressed the Treasury Department to be more open about the rescue of companies including insurer American International Group Inc. and automakers General Motors Co. and Chrysler LLC.

“Tens of billions of dollars are likely to be lost on the automotive bailout,” Barofsky said. In addition, some banks that received TARP money are failing, so the aid they received will be wiped out.

Barofsky also said he is working on a review of how the government exercises its rights as a shareholder in the auto companies, Citigroup Inc. and other firms in which it holds large stakes."

[defendandprotect]

15. Rather, I think we bought PARTNERSHIPS . . . ???!!!! How about interest, at least????

[Tierra_y_Libertad]

17. Brought to you by the P.T. Barnum Acadamy of Bailouts & Recovery.

Guess who the suckers are.