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TARP Profit Proves It Was the Right Call

April 4th, 2011 at 1:34 pm David Frum | 81 Comments |

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Here’s why TARP’s $24 billion profit is so important: The profit confirms that what happened in October 2008 was truly a panic, truly a situation where a buyer of last resort could restore values by decisive action. Which is what happened. Had such a thing happened in 1931, the whole history of the world would have been different.

There’s a lot to indict in the recent financial management of the United States. TARP should not have been necessary. But it was, and the profit is the proof.


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81 Comments so far ↓

  • cheves222

    Right as rain.

  • Smargalicious

    Thank God for George Bush.

    • COProgressive

      Right! Without George W Bush and the Republican Laissez Faire (unbridaled GREED) market philosophy TARP would never have been needed.

      • busboy33

        Smarg last two months :”TARP is an example of how horrible Obama is”
        Smarg today:”TARP is an example of how awesome W was”

        I do appreciate that you don’t even pretend to be trying to actually ever make a point. Most trolls at least disguise their efforts — you don’t bother. You’ll say anything, no matter how nonsensical and contradictory, just as long as you can be a dick to Democrats. That kind of purity of purpose is refreshing.

    • armstp

      Smarg,

      The only reason that TARP passed was because all the Democrats voted for it. Most of the Republicans did not vote for it. If it was not for the Democratic votes the TARP would not have passed.

  • Gramps

    Smarg…yer so cute!

    You jumped on that good news like “white on rice”…

    I just cain’t help but luv yah, hon…!

  • COProgressive

    The American taxpayer profited from TARP. Whoopee!

    The Wall Street banks profited even more. Whoopee? Goldman Sach, Return on average common shareholders’ equity (ROE) was 11.5% for 2010, compared with 22.5% for 2009.

    American homeowners who were forced into foreclosure didn’t profit at all.

  • Non-Contributor

    I think there is a lot that can be discussed on what could have been done better.

    But my question is why doesn’t the GOP want to make some structural changes so this will not happen again?

    Maybe because in their mind it did not adversely affect wall street and they really could not care less about the working class.

    • Reflection Ephemeral

      Yeah, this is an important point. What were the alternatives? Did we get the kind of profit that Warren Buffett did for his investment in GS?

      This is good news, for sure, but it doesn’t necessarily close the book on anything.

  • ottovbvs

    TARP was both necessary and has proved a considerable success. So why did Republicans in congress vote solidly against it even though it was proposed by their own presidents’s treasury secretary? Brain fever? And of course most of it’s subsequent utilisation was by Obama and Geithner who used it save the US auto industry as well as shore up the banks and other parts of the financial system.

    • Gramps

      Smarg…are you there hon?

      Are you reading…?

      • Smargalicious

        But of course.

        Everyone knows I’m a genius.

        :D

        • Gramps

          Smarg…I’m attempting to determine if yer a hummingbird or a butterfly…

          Your reaction is often so immediate… you may be part of Frum’s intellectual on-staff, “ generate hostile response team”…

          …or you’re a stay at home Mom, with an extremely bright child or two, yer “home schooling”…

          I’m flummoxed…!

        • Gramps

          Are you an “M”

  • DFL

    According to the National Taxpayers Union, the banks that were bailed out by TARP punted their bad assets to Fannie Mae and Freddie Mac, both of which received separate bail outs. Fannie Mae and Freddie Mac may need as much as $200-300 billion in the future. Obviously, the National Taxpayers Union is ideologically driven and very inclined to think badly towards TARP.

    Perhaps something worth discussing is how to deal with business which are “too big to fail.”

  • Saladdin

    Isn’t the GOP running away from this “success?”

  • sdspringy

    http://www.minyanville.com/businessmarkets/articles/extend-and-pretent-recovery-commericial-lending/3/31/2011/id/33692

    The Federal Reserve-paid shills and Wall Street front men are out in droves declaring that TARP was a success and the banking system is recovering strongly. Columnists like Robert Samuelson declare TARP was a great investment and will profit the taxpayer. Samuelson says that the Treasury has recouped $244 billion of the $245 billion it invested in banks and that, when it winds down its last investments, it likely will show a $20 billion profit from the banks. This type of propaganda is ludicrous, as Barry Ritholtz succinctly points out:
    No, we are not profitable on the bailouts. TARP has $123B to go before breakeven, and the GSEs are $133B in the hole. All told, the Taxpayers have a long way to go before we are breakeven. That’s before we count lost income from savings, bonds, etc., the increased costs of food stuff and energy due to inflation (the Fed’s has done this on purpose as part of their rescue plan), the higher fees the reduced competition of megabanks has created, and the future costs our Moral Hazard will have wrought in increased risks and disasters.
    Fannie Mae and Freddie Mac have hundreds of billions in bad loans sitting on their balance sheets. Their total cost to taxpayers will reach $400 billion, and never be repaid. The Federal Reserve has over $1 trillion in toxic assets on its balance sheet, off loaded by the TARP recipient banks in 2009. The taxpayer will never be repaid for this toxic waste.

    The reality on the ground does not match the rhetoric coming from the government, Wall Street and the corporate mainstream media.

    http://hotair.com/archives/2011/03/17/just-a-reminder-tarp-still-at-least-123-billion-in-red/

    [blockquote]The watchdog panel for the $700 billion bank bailout faulted the U.S. government for the last time on Wednesday, saying the program helped underpin the perception that federal authorities will always prevent troubled financial firms from failing.
    In its final report on the bank bailout, the panel attacked the government for not being transparent enough and not articulating clear goals for its foreclosure prevention program.
    It also said federal intervention transformed the notion of ‘too big to fail’ into a stark reality.[/blockquote]

    A tax payer funded bailout is not a success David.

    • ottovbvs

      Anyone can post contrarian quotes from silly sources like Minyanville which is heavily invested in talking up economic failure of one sort and another. About a year ago they were forecasting double dip recessions, massive inflation and sundry other ills. And for your info even if 123 billion is correct it’s chump change relative to letting the entire financial and auto industries collapse. Do you know what the savings and loan clean up cost in constant dollars. Go on google it.

      • sdspringy

        That attitude is certainly valid if Otto you are prepared to scape the bankruptcy laws of the country. And also to continue the “too big to fail” policy of this administration.

        Obivously the Dem montra of holding the big money interest accountable is a fraud and that appears to be the policy of the big monied interest of the Democratic party.

        Of course the policy you support also supplied Billions to foreign banks including Libya. Great Plan, can we call that a sucess as well.

        • ottovbvs

          And also to continue the “too big to fail” policy of this administration.

          Actually it was the too big to fail policy of the Bush admin’s treasury sec. But then historical accuracy never was your strong point was it? And Yep Paulson was right, there are some institutions that are too big to fail. You’re just too childish and consumed with partisan rancor to recognize it.

        • sdspringy

          Oh really Obama, Clinton, Reid, Pelosi didn’t vote for it. Remember your basic government classes, Congress controls the purse. So no matter who the President is, its Congress that controls how the money is spent.

          Politics aside Otto, I disagree with the policy, your a business man those companies could have operated while in bankruptcy.

  • Gramps

    sdspringy // Apr 4, 2011 at 4:14 pm

    Doesen’t that sorry…

    “blockquote, thingie”

    …really, really piss you off, damn werks when it wants too…

    WEBMASTER…!

    OH YES…!

  • Gramps

    Dear webmaster…
    Perhaps we could be provided some special rules how we the simple diminutive users of yer…blog might successfully use yer provided “HTML” icons on an consistant basis…?

    “blockquote icon.”

    Will work on a consistent basis…or remove the poorly implemented…

    Piece of sheet…!

  • talkradiosucks.com

    “A tax payer funded bailout is not a success David.”

    That depends on what the alternative would have been. I’m not thrilled with the concept behind any type of bailout, but a depression wouldn’t have thrilled me too much either.

    • busboy33

      Agreed.

      Best plan in a vacuum? No. Better than worldwide economic devastation? Hell yes, even without the profit.

      An amputation is a horrible plan . . . unless the alternative is death. Then, it looks pretty damn good.

  • Gramps

    I think I’ve figured it out..?

    If you leave blank spaces, blank lines, or paragraph spaces the “blockquote thingie” goes into total meltdown…
    Webmaster…
    Delete the icon…!

    Let them that knows, use HTML markup language for “block quoting…”

    ” intel quoted”

    You’re implementation is very erratic, unpredictable and total crap…

    Hugs we luv the werk you do, do…Hehehe…!

  • medinnus

    If we had to have a bailout, at least that one paid itself back…

    …and, in the same way that a stopped clock is correct twice a day, Smeggy Wide-Stance is correct that GWB deserves credit for TARP and its success, not Obama

    • valkayec

      In truth, both Bush and Obama administrations are responsible for the success and failures of TARP. And both parties are responsible for the new financial regs not being stronger and for not getting rid of TBTF.

      See Simon Johnson’s http://baselinescenario.com/ for more extensive coverage of the financial industry meets politics.

  • jorae

    Correct me if I’m wrong…

    The TARP started with buying “prefered stocks” that could be bought back. The money was divided in two 700 billion dollars.

    Of that first group of money, the stocks were purchased, but sometime in April 2009, Bernakie changed it to just “shore up” banks…basically giving it away, without the stocks.

    We all know that Goldman Sacks and a few other returned the money because Obama was inforcing the CEO limits if you took the money.

    Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to refund a combined $45 billion of government funds due to this CEO rule.

    How much of the money given under the “premium” stocks has been returned? We know why at least 45 billion was…due to the CEO controlled salaries with the package…That was part of the first 350 billion

    How much was a “give away” under Bernakie’s “shore up” the banks? And will never be returned?
    But in this 2nd half of the money, we had the TARP used for GM…

    How much stock did we buy for the 700 Billion…how much was “given away”?

    • sdspringy

      That was NOT the legislative mandate of TARP however to buy stock.

      The legislation specifically required the TARP money to buy toxic assests. But soon into the process Ole Ben realized that to do that he would place a value on those assest. This very simple requirement to know the value of what you are buying would have bankrupted these banks. Because the assests were not worth the paper they were printed on.

      So Ole Ben ignores the legislation and throws the money at the banks. Those toxic assest will be sucked up by Fannie/Freddie and you will own them. You get to pay for the bad decision making of Goldman Sac, Chase, AIG, and of course banks in Libya. Gotta love the way these bankers think.

      • ottovbvs

        That was NOT the legislative mandate of TARP however to buy stock.

        Why do you feel compelled to keep demonstrating your ignorance Springy, the Tarp legislation gave the Bush and Obama admins wide discretion in how they used it.

        • sdspringy

          Read the bill Otto.

          (Sec. 109) Directs the Secretary, to the extent that he or she acquires mortgages, mortgage-backed securities, and other assets secured by residential real estate, and the Federal Housing Finance Agency, as conservator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), to implement a plan to maximize assistance for home owners and encourage the servicers of the underlying mortgages to take advantage of the HOPE for Homeowners Program under the National Housing Act or other available programs to minimize foreclosures. Authorizes the Secretary to use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.

          Stocks are not listed, mortgage related securities are. Sorry Otto but your wrong.

  • armstp

    It was the right call to stabilize the banking system, but it was not the right call to necessarily make all these banks whole. Goldman for example should not have gotten 100 cents on the dollar for the money it put into AIG. In addition, these banks should have only been bailed-out provided that upper management was fired and some of these guys should have went to jail.

    • Gramps

      That’s grammar police here…
      armstp // Apr 4, 2011 at 5:17 pm

      In addition, these banks should have only been bailed-out provided that upper management was fired and some of these guys should have went to jail.

      Hugs…!

    • ottovbvs

      Goldman for example should not have gotten 100 cents on the dollar for the money it put into AIG.

      The problem was it wasn’t just Goldman invested in AIG. You couldn’t just say we don’t like Mr Blankfein so we’re going single his institution out for special negative treatment and leave the other bondholders intact. And if you’d given everyone the haircut it would have ricochetd through the world banking and insurance systems. So yeah, we showed that Blankfein guy, but in the process we bring down half the rest of the worlds banking and insurance business.

      • armstp

        Otto,

        Goldman is just the example and the biggest example when it came to AIG. Obviously, the same applies to others.

        No easy anwer here.

    • COProgressive

      arm, just to clear up an important point……

      It was Goldman Sachs that brought down AIG and triggered the meltdown, and made a bundle on it as well.

      It worked like this. In a nutshell, AIG-FP insured Collaterized Debt Obligations, CDO’s. CDO’s are a collection residential mortgages, commericial loans and other types of debt all bundled up and given a “value”, say $1 Billion dollars. Historically, CDO’s are good investment (generally AAA rated) and the insurance company doesn’t have to pay off. For the insurance company policy payments are “found” money.

      But the trick here is that you can insure (hedge) someone elses CDO, you don’t have to own it to insure (hedge) it. You can take a short position that if the “value” falls below some predefined level you get paid the full value of the CDO, $1 Billion dollars. So, for 1 or 2% of the face “value” of the CDO each year you stand the chance of “WINNING” $1 Billion dollars.

      That’s what Goldman Sachs did when they saw the sub-prime market starting to nose dive. They hedged against a number of CDO’s worth billions, as did many other people. There was NO LIMIT on the number of hedges (Bets) against a CDO. One CDO could have 10, or 50 or a 100 hedges (bets) against it all covered by AIG or another company selling CDO insurance, each one of those hedges standing to win $1 Billion should the CDO fail. So one $1 Billion CDO could cost the insurer many Billions in payouts. That’s what happened to AIG.

      The real sucky part of this is Goldman Sach and others got paid $1 Billion or the face “value” of the CDO that failed even though they did not own the CDO. The American Taxpayer paid off all the hedged bets made at 100 cents on the dollar. We covered Goldman Sachs and others bets on CDO they did not own. That’s why many have called what Wall Street has become a “Casino”. It was the multibillion dollars bets by hedge fund managers and the Goldman Sachs of Wall Street that the American taxpayer covered, and that was all BEFORE TARP!

  • Gramps

    That’s “shoring”, up the banks…

  • Gramps

    [blockquote]ScoopAway // Apr 4, 2011 at 4:49 pm

    Gramps, I think it’s time for your nap.[/blockquote]

    OK Scoop…
    Does the above werk…?
    I’m gonna have to post again to “verify”…

  • ottovbvs

    sdspringy // Apr 4, 2011 at 5:35 pm

    Oh really

    How Springy disposes of the fact that Tarp was actually a Republican admins policy that had to be passed with mainly democratic votes to save the financial system.

    • sdspringy

      Otto, I am surprised at your lack of knowledge. Congress passes financial legislation to be signed by the President. Bush didn’t get to write it, just sign it.

      SO if the legislation sucked the ones controlling Congress are to blame, Democrats, OR the minority party wrote the legislation, doubtful.

      • WillyP

        “Otto, I am surprised at your lack of knowledge.”

        That’s just ’cause you don’t know him.

        The real test will be whether Otter supports QE3. We’ll know in the coming months.

      • ottovbvs

        Otto, I am surprised at your lack of knowledge. Congress passes financial legislation to be signed by the President. Bush didn’t get to write it, just sign it.

        This wasn’t Paulson’s bill? Needless to say I’m not surprised at your continuing sense of unreality.

        • sdspringy

          Facts actually are difficult to get around Otto.

          http://ac360.blogs.cnn.com/2009/02/09/is-this-an-economic-stimulus-or-viagra-for-special-interests/

          The Democratic Congress produced the TARP legislation (referred to as the bailout) that, contrary to their stated intentions, allowed banks to horde our tax dollars and buy healthy financial institutions, instead of requiring that our tax dollars be used by the healthy banks to make loans and stabilize failing banks.

          As we know all too well, the legislation did not meet the promise of capping bonuses on Wall Street. While Senator Claire McCaskill was calling Wall Street executives idiots on the floor of the Senate, many were wondering who the idiots were who wrote the TARP legislation in the first place. The greatest failure of this legislation was its failure to address the cause of this crisis: the bad mortgage loans and the foreclosure crisis that resulted from it. As Senator Christopher Dodd, the Chairman of the Senate Banking Committee, stated on November 22, 2008 “We have to comeback in January to stiffen the bill.” Well, stiffening their spines might also be required.

        • ottovbvs

          Facts actually are difficult to get around Otto….The Democratic Congress produced the TARP legislation

          Apparently as well as being an habitual liar you can’t read either Springy

          [b]i]By POLITICO STAFF | 9/19/08 10:17 AM EDT Text Size- + reset
          Get ready to hear a lot about TARP — the “troubled asset relief program” that Treasury Secretary Henry Paulson proposed Friday as a way for the government to take bad mortages off the loans of the nation’s financial institutions.

          “The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy,” Paulson said in his statement. “This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible. The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars. I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”

          Here is the text of Paulson’s statement at the Treasury headquarters, on a “Comprehensive Approach to Market Developments”:

          Last night, Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox and I had a lengthy and productive working session with Congressional leaders. We began a substantive discussion [/i][/b]

      • ottovbvs

        This remember was SIX weeks before the presidential election. Springy not only lies constantly but he’s not very good at it

        [i]By POLITICO STAFF | 9/19/08 10:17 AM EDT Text Size- + reset
        Get ready to hear a lot about TARP — the “troubled asset relief program” that Treasury Secretary Henry Paulson proposed Friday as a way for the government to take bad mortages off the loans of the nation’s financial institutions.

        “The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy,” Paulson said in his statement. “This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible. The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars. I am convinced that this bold approach will cost American families far less than the alternative — a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”

        Here is the text of Paulson’s statement at the Treasury headquarters, on a “Comprehensive Approach to Market Developments”:

        Last night, Federal Reserve Chairman Ben Bernanke, SEC Chairman Chris Cox and I had a lengthy and productive working session with Congressional leaders. We began a substantive discussion [/i]

        If you want to lie Springy at least try to do it effectively. Until then I’ll take a raincheck on your absurdities.

        • sdspringy

          Don’t see anything it your post Otto about buying stocks. Admit it Otto, Congress failed to provide oversight and prevent a fraud with tax payer money.

        • ottovbvs

          Now change the subject eh Springy. Your lies and evasions are so transparent. Where the failure of oversight occurred was in the Bush admin and the Fed from 2001 to 2008. Now the crisis is over Republicans in house and senate are trying block oversight arising out of Dodd Frank again at the behest of their paymasters on Wall Street. You might want to focus on that instead of peddling a pile of bs.

  • Gramps

    OK, Scoop, I’ll try again…

    ScoopAway // Apr 4, 2011 at 4:49 pm

    Gramps,…

    I think it’s time for your nap…

    Now Scoop, what I did was “copy and paste” my earlier comment. I then enclosed it yer “sorry” “blockquote” icon…
    The icon werks, when the “management” want’s it to werk…!

    Delete yer “blockquote” icon from yer, selective, options… “menu”…
    It’s a piece of selective, commentary, “sheet’…!

    Hug’s mother!
    Get yerself an “HTML” programmer…!

  • Gramps

    Oh hotte damn…
    It only werks when the management “want’s it to werk”…
    Oh my…
    I’m gonna go back to pettin’ the dog and strokin’ the purrin’ cat…

    Hugs, Momma…!

  • Gramps

    I’m really a big disappointment…
    “Mon apologies…!”

    Can I still gettah hug…?

  • think4yourself

    It’s easy to be a Monday morning quarterback. While I’m not a fan of GWB, I think they took pretty courageous action (at least after the Lehman Brothers meltdown). Repubs were generally not for the bailout. While we can argue that Goldman and others made out like bandits and should have had their feet held to the fire, the fact is the incentives they got to pay back meant they paid back much faster than anyone expected (remember the doom & gloom about maybe getting paid back 10 cents on the dollar). Any other structure would have just as many critics.

    I believe no action would have resulted in a much worse international financial crisis (you think 10% US unemployment was bad – what if 25% of the all the major worldwide banks fell?). Yes we bailed out GM & Chrysler – yet jobs at those companies, Ford and many of the related suppliers were saved (I know many of those jobs were lost – but thousands more would have been lost if no action had been taken).

    I don’t like that the big banks got a disproportianate share of profits and that it may reinforce to big to fail (I’d bring back Glass-Steagal myself) and Fannie & Freddie and AIG are still left for us to deal with. I wouldn’t blame TARP for decreased revenue from savings and increased food prices from inflation (hard to have that one both ways).

    TARP did not cause the financial meltdown. It was an imperfect solution but perhaps the best one that could be implemented at the time given the political realities. I don’t think that solutions from the Left (Krugman, Stiglitz) for nationalizing the banks, or solutions from the Right (Roberts) to have let all the banks fail, would have led to the best national outcome.

    Going forweard, I would have like to see Glass-Steagal reinstated and would have liked to ensure that we found ways to ensure big-bailouts won’t occur in the future (and have that priced into the marketplace – meaning solutions from both the left and right). One of the reasons I am not for Paul Ryan’s plan to privatize part of Social Security is that I believe in the next financial downturn, that the Gov’t will be pressured to bailout those whose SS became effected.

    I’ll bet I get comments from both Left & Right on this one.

    • busboy33

      I’m certainly no fan of how TARP actually functioned in large part, and I’m especially no fan of the system that caused it to be needed in the first place . . . but as I’ve said before, TARP was better (all faults included) than the alternative.

  • WillyP

    It was the Bush administration who produced and sponsored TARP. It was Sec. Paulson’s idea. If you like TARP and what it has produced – zombie banks – give credit where credit is due (no pun intended).

    If you repudiate it, then call out Bush and the Democrat legislators who voted for it.

    Not so difficult to understand who is responsible. A little more complicated when you get into the debate as to whether it was a good idea. Clearly, very clearly as we can see over the past 2.5 years, it wasn’t.

    The outrageously revisionist history that says the Depression was caused by bank failures, and thus TARP prevented a 2nd Great Depression by averting collapse is wrong on many fronts. First of all, there have been hundreds of bank failures since 2008. Second, the policy of the Fed during the Depression was to inflate inflate inflate, with the stated goal of preventing further failures (sound familiar?).

    We are pursuing a series of policies nearly identical to what we followed during the Great Depression (at least in terms of financial legislation), and getting the same results. Delay liquidation and get stagnation an unemployment. Eventually get inflation.

    All clear now people? I hope so!

  • Andrew Sullivan Fooled by Government Propaganda (Who'da thought it?) - Hit & Run : Reason Magazine

    [...] Update: Now you're thinking: "OK, Sully's this inexplicable figure who gets more people listening to him the more often he is shown to be wrong. But surely he's the only one. And nobody else would be enough of a chump to believe the TARP profit story, right?" Hold your horses! It's the Great Frumkin, Charlie Brown. [...]

  • jorae

    Bush requests the $700 billion “bail-out” – House Rep create- the Emergency Economic Stabilization Act of 2008, H.R. 3997 (attached to another bill)

    Public Law 110-343 (Pub.L. 110-343, 122 Stat. 3765, enacted October 3, 2008) is an Act of Congress signed into law by U.S. President George W. Bush, which was designed to mitigate the growing financial crisis of 2007.

    I’ts formal purpose was ….An Act To provide authority for the Federal Government to ……..purchase ……….and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers…That was the original vision of Henry Paulson, the Bush administration’s treasury secretary and one of the architects of the plan.

    Signed into Law on Oct 3, 2008 (the 4 different versions can be seen at
    http://www.govtrack.us/special/econstimbill/changes.xpd?id=4)

    Buy Toxic Assets?

    The Troubled Assets Relief Program, or TARP, was envisioned as a giant pot of money the federal government could use to buy toxic assets, the mortgage-backed investments that triggered the nation’s financial crisis. The idea was to buy the bad assets so banks would be in better shape to do more lending.

    Or Buy Stocks….

    But just 10 days later, Oct 14, 2008….while still under the Bush Administration….Paulson and the Bush administration changed the game plan. Instead of buying toxic assets, they said they would buy stock in American banks to put them on sound footing so they could resume lending.

    Instead of using the early TARP money to buy the toxic assets, (AS THE LAW outlines)….he decided to use it to invest in banks. That, Paulson said, would get them to resume lending.

    ====
    March 24, 2009
    Article by George Will
    Town Hall Conservative
    http://townhall.com/columnists/georgewill/

    George Will on Tuesday, March 24th, 2009 ..

    Troubled Assets Relief Program, $325 billion of which has been spent without purchasing any toxic assets.”…..

    —————
    Buying Toxic Assets…

    Mark to Market? – would have given a price…

    Banks books shows Mortgage $100,000…..Real value now $80,000

    1. So was the original play to buy it at $80,000 – then the Feds would own that property and let FDIC pick up the $20,000?

    Or did Bernankie just give the Bank $20,000 to bring the “asset” so they did not have to “Mark to Market?”….To balance the books?

    The majority of unrecoverable business were not banks, but the outgrowth of letting banks get bigger – like Country Wide
    Note…Bank of America on Jan 11, 2008, announced it will buy Countrywide Financial for $4.1 billion in stock, a deal that rescues the country’s biggest mortgage lender and expands the financial services empire of the nation’s largest consumer bank.)

    As far as I can see, the Amount Allowed was 700 billion…How much of that money was used to buy “stocks” and how much was used to “shore up?” without any payback?

    2. Bank lost money it holds for others….Wouldn’t that loss be under FDIC?
    ???????????????

    .

  • jorae

    6/11/2009 WSJ –
    10 BANKS repay TARP – $68 BILLION

    J.P. Morgan $25,000.00
    Goldman $10,000.00
    Morgan Stanley $10,000.00
    U.S. Bancorp $6,600.00
    BB&T Corp $3,130.00
    American Express Co. $2,654.00 …….(guess work from here down $$)
    Capital One Financial Corp $2,654.00
    Bank of New York Mellon Corp $2,654.00
    State Street Corp $2,654.00
    Northern Trust Corp $2,654.00

    ———–
    Bancorp

    Monday, 08 November 2010 – 5 MONTHS AGO…

    Pacific Capital Bancorp repaid its TARP funds — It did so as part of its $500 million rescue deal with a Texas private equity group… The DEAL in which the Treasury agreed to exchange its original investment (The 500 million) for common equity in the company.

    The deal means Pacific Capital has officially repaid its Treasury obligations, but with the firm’s share price fluctuating wildly over the last several weeks, it remains to be seen whether taxpayers will actually see their investment made whole.
    ————————

    When I see the WSJ saying that BanCorp paid off their TARP, then I read a more detailed description…run in a trade paper….

    They just handed over STOCK …that $500 million was handed over to them …we want 500 million plus interest BACK…

    WTF… that loan is not paid OFF….How much of this crap is going to be ponded off on the public? It was a “CON” game from the very start. And now the ones that perpetuated it, want back in office, so NOW they have to “white wash” the facts!

  • jorae

    JUNE 10, 2009

    The 10 banks seeking to return government money will be able to continue leaning on the U.S. government in other ways, including by issuing debt guaranteed by the Federal Deposit Insurance Corp.

    http://online.wsj.com/article/SB124455528999797923.html

  • jorae

    March 16, 2011 04:05

    Bridge Capital Holdings Completes TARP Repayment

    SAN JOSE, Calif.–(BUSINESS WIRE)–Bridge Capital Holdings (Nasdaq:BBNK), whose subsidiary is Bridge Bank, National Association, announced today that it has completed the redemption of $24.0 million in Series B Preferred Stock issued to the U.S. Treasury under the Troubled Asset Relief Program’s Capital Purchase Program.

    The U.S. Treasury continues to hold warrants to purchase 396,412 shares of Bridge Capital Holdings common stock, which the Company expects to repurchase in the near future…

    —-
    How is this a repayment when the Treasury still holds stock? Did they repay with the common stock!

    Stock-purchase warrant – a type of security issued by a corporation (usually together with a bond or preferred stock)

  • Rabiner

    Why does TARP making a profit show it was the right thing to do? Last I heard profit should have no baring on the success of a government program designed to save the financial industry from collapse but rather the fact the financial industry did not collapse was success enough? Profit is merely a bonus.

    • sinz54

      Rabiner:

      You can save any organization–no matter its situation–from collapse, if you pour enough Government money into it and keep it on the public dole indefinitely. If the Government had poured $50 billion into American Motors or Commodore Computers, those companies would still be around–and the Government program would still be bleeding money.

      Maybe “profit” is the wrong metric. But Frum’s point is that TARP paid for itself–and can be phased out without keeping all the bailout recipients on a permanent dole.

      • busboy33

        @Rabiner:

        I agree with you somewhat. I’ve got no problem with a deal like this turning a profit. My disagreement with the headline is that TARP ending in a profit doesn’t “prove” it was the right call, but rather “proves” that it worked. “Right call” suggests that it was the best option, and it ending successfully doesn’t prove that at all.

        Did it work? Yes. Did it work well? I guess so. Was it the best of all possible solutions? I don’t know how you get to to that from “it made a profit”. Something else might have made more profit, or been less onerous, etc. But to paraphrase Heinlein, sometimes doing something constructive right now is better than doing the best thing after its too late.

  • nuser

    So does that make Bush a socialist?

    • COProgressive

      No. Bush took the people’s money and spread it UP. It was Sarah Palin, while Halfgovernor, that raised taxes on the oil companies and spread that money around to the people. That’s socialism.

      “We shouldn’t worry about government having enough money, the government has plenty of money” Sarah Palin Socialist Runner Up Beauty Queen and Halfgovernor of Alaska

  • pnumi2

    WillyP

    “Delay liquidation and get stagnation an unemployment. Eventually get inflation.”

    Hasten liquidation and get stifled demand and unemployment. Eventually get depression.

  • nuser

    It was never the right call. You are prostituting yourself.All he was doing (Bush) was catering to buddies.Nearing my end, sure you are happy to hear that. Enjoyed the” Shakespeare” crowd.
    Horatio, pray tell are you there?

  • nuser

    Gramps
    Can’t help loving you!

  • Rabiner

    Sinz and Busboy:

    This is what Frum wrote: “The profit confirms that what happened in October 2008 was truly a panic, truly a situation where a buyer of last resort could restore values by decisive action”

    Profit makes it right in his mind or at least in this post according to him. It’s a silly metric to use and definitely doesn’t prove one way to the other if what happened in October 2008 was truly a panic.

    To your point Sinz: “Maybe “profit” is the wrong metric. But Frum’s point is that TARP paid for itself–and can be phased out without keeping all the bailout recipients on a permanent dole.”

    I don’t think he means that at all and it definitely is the wrong metric. Paying for oneself has little to do with it being worthwhile to calm the markets in October 2008 since we didn’t even know about the profit until now, 2.5 years later.

    To Busboy: “I agree with you somewhat. I’ve got no problem with a deal like this turning a profit. My disagreement with the headline is that TARP ending in a profit doesn’t “prove” it was the right call, but rather “proves” that it worked. “Right call” suggests that it was the best option, and it ending successfully doesn’t prove that at all.”

    Actually profit doesn’t prove it worked. The fact the financial markets stabilized rather than us seeing a run on the banks is proof it worked. Turning a profit was never an objective of TARP (although minimizing long term costs was) and is more a reflecting of how well it was designed sure, but it was successful 2 years before it turned a profit.

    The problem I have with the metric is this: Should we ever determine the success of a government program on the ‘profit’ it makes? I don’t think so. But good points from both of you.

  • Paleocon

    So we made a profit, huh?

    Estimated Total Costs of Bailout

    Fannie and Freddie bailout = $700 billion estimated, at least, on their $5 trillion portfolio.

    Federal Reserve’s increased printing of money to fund purchase of mortgage securities in market and bad assets from banks (which directly leads to an equal amount of inflation, a hidden tax on consumers and savers) = $2 trillion.

    Eventual FDIC losses = $500 billion.

    Credit union guarantees = $50 billion.

    Present value cost of lost interest income to US retirees and other savers due to government’s zero interest rate policy = $2 trillion.

    Present value cost of additional high unemployment and lost wages caused by government’s focusing on bank and Wall Street profitability first, rather than on job creation = $5 trillion.

    Total loss in housing values due to inappropriate response to overbuilding and high foreclosure problem = $4 trillion (a fraction of the total housing value loss of10 trillion, much of which was necessary to return to non-bubble levels).

    Cost of future bad loans created since 2008 by Fannnie, Freddie and FHA by continuing to lend aggressively into declining real estate markets = $300 billion.

    Wasted stimulus money (Where exactly did this money go and what do we have to show for it?) = $300 billion.

    Total estimated cost of government bailout = $14.85 trillion.

    This is from John R. Talbott, October, 2010

    • ottovbvs

      “Present value cost of lost interest income to US retirees and other savers due to government’s zero interest rate policy = $2 trillion.”

      This is one of the most bizarre collection of numbers I’ve ever seen. But this one made me laugh the most. I’m surprised he hasn’t included all the notional losses when the Dow went to about 6,300. And who is John Talbott? Update. I looked him up and apparently his claim to divinity rests on the fact he wrote a book predicting a global financial crisis in 2007/2008. Well guess what. I didn’t write a book but I predicted exactly the same thing and acted accordingly. The only people saying there wasn’t going to be a crash were the Bush admin and its shills on cable news shows.

  • Rabiner

    Paleocon,

    Good thing John Talbott isn’t someone anyone listens to. That list is stupid when considering costs to the government. You’re going to say a reduction in value of homes is a cost to government is pretty silly.

    • pnumi2

      “a reduction in value of homes is a cost to government is pretty silly.”

      It may not be a cost to the Federal Government, but doesn’t it impact local governments that collect property tax based on the value of homes?

  • sdspringy

    Jorae has found the problem with TARP while Otto flails around his partisan sandbox. Granted the banks paid back the TARP money but where are all those toxic assests.

    The reason for the panic, the poor legislation, the political grandstanding was to eliminate toxic assests. However Otto fails, because the lack of daylight from the current position of his head, to grasp that fundamental fact.

    TARP evolved into an executive branch revolving credit account. The toxic assests were slipped off the books of the so called troubled banks with absolutely no liability on their parts.

    So OTTO who has to pay for the toxic assests?? You do. I personnally would not consider that a problem except in this case you and I are in the same financial boat. The financial shell game played by Paulson and Bernake should get them fired.

  • MSheridan

    I didn’t care for how TARP was implemented, but some such bailout was necessary. I don’t know why people obsess so much over TARP anyway. $700 billion is a hell of a lot less than the $3 TRILLION already provided by the Fed to shore up the failing balance sheets everywhere (both here and abroad) with no vote from Congress whatsoever.

    http://www.bloomberg.com/news/2010-12-01/fed-names-recipients-of-3-3-trillion-of-aid-during-u-s-financial-crisis.html

    Back in July of ’08, I wrote a commentary about the part of that then visible to us:
    http://www.dailykos.com/story/2008/07/13/550869/-Thank-you,-Mr-Gramm

  • pnumi2

    I don’t think the profits of the banks proves a thing. The proof of TARP remains in the pudding, not in the profits and 2 1/2 years isn’t sufficient time to bake this one.

    Yes, things look very good right now compared to the last quarter of ’08 and the first quarter of ’09 and the banks have repaid the funds that TARP made them borrow. But where did they make those profits? From buying the market at Dow 6600? From selling their toxic assets to the Fed at cost?

    We’re going to have to wait to find out how real those profits were.

    After all, many investors profited handsomely for years from their investment in Bernard Madoff’s legendary fund, but, alas, they had those profits clawed back by the court-appointed trustee.

  • pnumi2

    WillyP

    “The phrase “between Scylla and Charybdis” has come to mean being in a state where one is between two dangers and moving away from one will cause you to come closer to the other. “Between Scylla and Charybdis” is the origin of the phrase “between the rock and the whirlpool” (the rock upon which Scylla dwelt and the whirlpool of Charybdis) and may also be the genesis of the phrase“between a rock and a hard place.”.

    When Ben Bernanke saw that the American economy was foundering between the rock of inflation and the whirlpool of depression, he did what any well trained economist in his position would do: he choose inflation. With all due respect, Austrian Economics would not have been of any use in December, 2008. Our economy then and now was in a place that no text book or testimony or history could have helped us with.

    The closest explanation to what had happened and what we could expect came from the great Russian economist, Nikolai Kondratieff. Krondratieff’s work was in economic cycles (and 19th century ones, at that) and if he had a methodology of of abbreviating them, it probably would have been lost in the astronomical size and numbers of ours in the 21st century.

    Bernanke choose inflation and I am thankful he did. I think everyone should be.

    I have read your posts and you think that financial institutions with negative balance sheets at that moment should have been liquidated. That would have begun a vicious cycle that could have driven the Dow down to 4000 and put even more balance sheets in the red which would have promoted more bankruptcies.

    If the market had gone down further, so would everyone’s 401(k)s and that would have reduced demand even more. Buyers of our treasuries might have pulled back some knowing that the National Debt was $13 trillion and that tax revenues would be off considerably for many years to come and then we wouldn’t have had the benefit of extremely low rates.

    Inflation obviously is the lesser of the two evils and and I think most economists think that. I know it has turned into a political football game, but, hey, that’s what America is all about. I know you disagree with me but Bernanke is doing what I want him to do so I’m more stoked than you are.

  • Excitable vs. Excitable | The Daily Caller - Breaking News, Opinion, Research, and Entertainment

    [...] in a less emo way) says Sullivan’s a rube for thinking TARP turned a profit. Same goes for Frum, apparently.  … (No Ratings Yet)  Loading [...]