Accounting for TARP and Bailouts

[pmbug]

From time to time, you will find the media reporting that TARP and/or bailout funds have been paid back - sometimes even with a profit. Propublica tells a different story:

We're tracking where taxpayer money has gone in the ongoing bailout of the financial system. Our database accounts for both the broader $700 billion bill and the separate bailout of Fannie Mae and Freddie Mac (go here for the Federal Reserve’s emergency loans to banks).

Chart: http://projects.propublica.org/bailout/list

As of this moment:

Recipients: 926
Total Committed: $633,575,722,738
Total Disbursed: $579,952,314,483
Total Returned: $277,816,965,263

More fun reading (from Dec. 2010):

Recent disclosures from the Federal Reserve reveal that honesty was one of the earliest casualties of the 2008 financial crisis. These disclosures contain a number of juicy tidbits, like the fact that Goldman Sachs received tens of billions of dollars in direct and indirect succor from the Fed.

Thanks to these spectacularly large taxpayer-funded bailouts, Goldman was able to continue “doing God’s Work” – as CEO Lloyd Blankfein infamously remarked – like the work of producing billion-dollar trading profits without ever suffering a single day of losses.

Thanks to the Fed’s massive, undisclosed assistance, Goldman Sachs managed to project an image of financial well-being, even while accessing tens of billions of dollars of direct assistance from the Federal Reserve.

By repaying its TARP loan, for example, Goldman wriggled out from under the nettlesome compensation limits imposed by TARP, while also conveying an image of financial strength. But this “strength” was illusory. Goldman repaid the TARP loans with funds it procured days earlier from the Federal Reserve. Then, over the ensuing months, Goldman recapitalized its balance sheet by selling tens of billions of dollars of mortgage-backed securities to the Fed.

And the public never knew anything about these activities until two weeks ago, when the Fed was forced to reveal them....
...

http://www.economicpolicyjournal.com/2010/12/totally-busted-truth-about-goldmans.html

 

[pmbug]

A government watchdog says U.S. taxpayers are still owed $132.9 billion that companies haven't repaid from the financial bailout, and some of that will never be recovered.

The bailout launched at the height of the financial crisis in September 2008 will continue to exist for years, says a report issued Thursday by Christy Romero, the acting special inspector general for the $700 billion bailout. Some bailout programs, such as the effort to help homeowners avoid foreclosure by reducing mortgage payments, will last as late as 2017, costing the government an additional $51 billion or so.

The gyrating stock market has slowed the Treasury Department's efforts to sell off its stakes in 458 bailed-out companies, the report says. They include insurer American International Group Inc., General Motors Co. and Ally Financial Inc.

If Treasury plans to sell its stock in the three companies at or above the price where taxpayers would break even on their investment — $28.73 a share for AIG, $53.98 for GM — it may take a long time for the market to rebound to that level, the report says. AIG's shares closed Wednesday at $25.31, while GM ended at $24.92. Ally isn't publicly traded.

It will also be challenging for the government to get out of the 458 companies as the market remains volatile and banks struggle keep afloat in the tough economy, it says.

Congress authorized $700 billion for the bailout of financial companies and automakers, and $413.4 billion was paid out. So far the government has recovered about $318 billion. The bailout is called the Troubled Asset Relief Program, or TARP.

"TARP is not over," Romero said in a statement. She said her office will maintain its commitment to protect taxpayers for the duration of the program.

Treasury spokesman Matt Anderson said the department "has made substantial progress winding down TARP and has already recovered more than 77 percent of the funds disbursed for the program, through repayments and other income."

"We'll continue to balance the important goals of exiting our investments as soon as practicable and maximizing value for taxpayers," Anderson said.

The government has unwound its investments in four of the companies that received the most aid: Bank of America Corp., Citigroup Inc., Chrysler Group LLC and Chrysler Financial, the automaker's old lending arm.

On Wednesday, Treasury announced that it had sold the final batch of securities under its $368 million Small Business Administration loan program under TARP.

In Romero's quarterly report to Congress, she said her office has uncovered and prevented fraud related to TARP. Investigations by her office have resulted in criminal charges against 10 people and three convictions, the report notes.

http://news.yahoo.com/taxpayers-still-owed-132-9b-bailout-report-051822679.html

ProPublica reports there is still a ~$320B deficit to be repaid (link in OP).

 

[DCFusor]

I forget where I saw this - ZH or Bberg - but someone did an FOIA on who was using the Fed window in the early days, and the results were quite a surprise. And no further comment on most. They revealed all this about 6 mos ago more or less (getting old, memory failing).

Some of the prime emergency loans went to outfits you'd not expect to need it to, as they claimed - make this week's payroll. Prominent were
Verizon
McDonalds
Harley Davidson

So, does the most rapacious, overcharging, duopoly telecom out there not actually make money? McDonalds? I could see Harley, but.

Are half the companies we think of as large-cap really doing the same as our government - just rolling debt forever, never paying back principle? While of course the golden parachutes and nifty bonuses abound?

It's funny how some seem to be doing much better PR management. IIRC, for example, Chrysler took all the same subsidies from the Gov for alternate energy, but they don't have a hybrid to offer - yet get none of the GM-hate out there.
While Ford didn't borrow outright - they did get some guarantees...just as good.

Where's all the hate for GE?

Any bad press on Verizon for not even being able to make payroll w/o bailing out?

Inquiring minds want to know! Is the ponzi actually bigger than even the skeptics realize?

 

[pmbug]

I forget where I saw this - ZH or Bberg - but someone did an FOIA on who was using the Fed window in the early days, and the results were quite a surprise. ...

IIRC, it was mostly domestic branches of foreign banks.

 

[DCFusor]

Yes, the foreign banks were also prominent but more or less unmentioned in the news. ZH was all over that one in their usual tinfoil hat manner - stealth bailout of Yurp by us here. But I found it weird that little attention was given to the "bread and butter, salt of the earth" outfits that didn't have the excuse (supposedly) of financial engineering gone bad, high leverage and so on, and which actually produced stuff of value (unlike the banks).

In other words, those pointed to (and still do) weaknesses that have little to do with some jerk just using too much leverage on a bad bet, or selling CDS too cheap - real on the ground economic issues that had little to do with the fake boom/bust.

After all, the banks are just supposed to be the "lube", not the real economy, though for awhile there they kinda took a spot they never should have. These other emergency borrowers were supposed to be the real underlying strength of things that bankers merely exploit - if you've got trouble there, you've got real trouble, not just bits that don't add up as desired.

 

[pmbug]

Most Americans have a sense TARP was a badly managed program that bailed out "fat cat" bankers at the expense of U.S. taxpayers. Well, it's even worse than you think, according to Neil Barofsky, former special inspector general for TARP (SIGTARP).

Officials in both the Bush and Obama administrations took the attitude "bankers know best," Barofsky recalls. "It was somewhat shocking how much control big banks had over their own bailout [and] the overwhelming deference show by Treasury officials to the banks."
...
Similarly, Barofsky takes offense to Treasury's repeated proclamations that TARP has been profitable.

While the big banks have paid back their loans, the overall program is now projected to lose somewhere between $32 billion to $70 billion, with $109.1 billion owed as of June 30, according to SIGTARP. Most of those losses are tied to AIG -- Treasury still own 61% of the company -- but more than half of the 325 banks that received TARP aid have missed dividend or interest payments.

"The bottom line is [the government] still expects tens of millions of losses on TARP," Barofsky says. "The losses are a lot less than originally anticipated but this resorting to trickery really shows you they're trying to cover up how badly TARP has failed in its other goals of helping homeowners and increasing lending to the economy."

More: http://finance.yahoo.com/blogs/dail...-abysmal-failure-barofsky-says-161743679.html

 

[DCFusor]

A lot of the stuff Barofsky has been revealing makes me think he should be watching his 6 very carefully.

 

[rblong2us]

You raise an interesting point DCF.

If the likes of Mc Donalds needed support to make payroll, then there is, or was, a deeper underlying problem.

Could the problem have been that their bank was unable to meet the payment and its future was in question at that moment ?

The Fed pumped out several $T around this time and its still not clear where it all went.
Just who is the ultimate bag holder for this sort of helicopter drop ?

Its waay beyond anything that 'taxpayers' could carry.

 

[pmbug]

Barofsky likely doesn't care anymore. He's said whatever he's got to say in his book which is being released shortly. The most dangerous men in the world are the ones with nothing to lose (or who don't care).