U.S. ends TARP with $15.3 billion profit

[n2doc]

Source: CNN

The U.S. government essentially closed the books on TARP with a $15.3 billion profit.

Treasury sold its remaining shares Friday in Ally Financial, its last remaining major stake from the $426 billion bailout of banks and the U.S. auto industry.

The Troubled Asset Relief Program was passed in 2008, in the wake of Lehman Brothers' bankruptcy, as the nation's financial system was on the verge of collapse and economists feared another Great Depression. At the height of the bailout, Treasury owned a significant stake in all of the major U.S. banks, such as Citigroup (C) and Bank of America (BAC), two of the nation's Big Three automakers -- General Motors (GM) and Chrysler Group (FCAM) -- as well as one of its largest insurers, AIG (AIG).

But with the sale of the Ally (ALLY) stock, Treasury now only holds stakes in 35 small community banks.

Read more: http://money.cnn.com/2014/12/19/news/companies/government-bailouts-end/

[Andy823]

1. Not bad

Of course a lot of right wingers and, anti Obama people, are going to be pissed.

[Igel]

31. Really?

Probably less than a 1% return on investment, just looking at the dollars involved and nothing more. And probably being generous at that, because the "profit" relies crucially upon what's likely to be judged by many who love the idea of TARP turning a profit as an inflated, bubble-like stock market.

Moreover, this is before inflation. In any given year inflation was at least 1%.

This is CYA accounting. Add up all expenses, add up all returns. What's missing is any thinking about what else that money could have done. Could it have been used to provide a larger return? If it hadn't been used, what would the losses have been? When you make financial decisions on anything more than petty purchases, those are the kinds of things people should think about: Is there a better use? What am I giving up? What need is being satisfied, and is it a need and not a want.

With TARP, we keep having such discussions but since the various sides can't agree on the facts (and when pushed for agreement, the topic shifts time and again).

The best this does is to avoid butt-obvious embarrassment. It's a rhetorical and not a substantive fig leaf.

For what it's worth, I'm on the side of TARP, but insist on saying that while it was a Bush II project over half of it was actually disbursed by Obama. On saying that while it had a good purpose, mitigating fiscal panic, a significant portion was used contrary to legislation for corporate bailouts for not so much economic as political purposes. Once the money was used for those purposes, the only recourse was for the Fed to do what TARP was supposed to do (although TARP was probably smaller than necessary, even before funds were siphoned off), with the consequence that the Fed probably overdid their program (again, partly for political purposes).

[SoapBox]

2. Terrible! Horrible! Criminal!

Pukes? Baggers? Profit? Now the program is closed?

Oh...

BENGHAZI!

[FBaggins]

8. Turning a profit is not evidence that it was a good idea

It isn't hard to turn a profit if you have the power to take partial ownership of a company and then by fiat return the company to profitability at the expense of competitors that didn't make the same mistakes.

It also doesn't hurt that you have the power to force other companies that neither needed nor wanted the capital to take it anyway and pay you dividends.

[George II]

14. Wasn't the program optional?

[FBaggins]

15. Not really

If only the banks that were in danger of failing took the money... then all of their customers would know that they were the ones in danger of failing. This would cause a run on those banks and no amount of government funds could prop them up - so TARP would fail. In order for the program to work, all of the largest banks had to take the money. There were a few (and quite a number in the next-largest tier) who didn't need it and didn't want it - but were "strongly encouraged" to participate.

[MADem]

26. Yeah, but didn't they publicly give it back and wave it off?

Isn't it "no secret" who needed it and who didn't?

[FBaggins]

32. They were actually forbidden to pay it back

We made quite a bit of profit from banks paying outsized dividends on money that they were not permitted to pay back.

Once that prohibition ended, there was a mini rush to pay it back, but that was quite some time later.

Yes... we now know who needed it. But they went out of their way to hide it at the time.

[joshcryer]

19. What competitors?

Only ones largely unaffected were credit unions.

[FBaggins]

33. It depends on how you define "affected"

There were certainly banks (including some large ones) that weren't involved in the shenanigans at the heart of the collapse.

Sure... they took hits - but that's because when the economy goes into a collapse, some borrowers that were perfectly appropriate loan recipients (good credit, solid income, plenty of collateral, etc.) still lose their jobs and can't repay the loans.

[joshcryer]

36. If a bank dealt with Fannie Mae and Freddie Mac they were affected.

Credit Unions are unique in that they underwrite their loans in house, so if you got a mortgage with a Credit Union, it was going to be rock solid, they weren't tied to MBSs or CDOs. Fannie Mae and Freddie Mac had 13 million substandard, non-viable loans when the crash happened. This would've been OK had those loans not been put into credit default swaps, and gambled with.

I'm not saying TARP's approach was ideal, breaking the banks up would've been a nice feature, but dozens and dozens of regional banks went kaput, and had to be bought out by the larger banks. This led to unnecessary consolidation.

[OrwellwasRight]

34. +1

"Save Wall St. to save Main St." -- what a fuckin' joke. Not a dime of that money helped Main St. The banks that took the $$$$ actually loaned LESS money to small biz after the bailout than before it. Credit didn't unfreeze at all for Main St.

"Save Wall St. to save Wall St." was all that program ever was.

[Sopkoviak]

9. And the best part is that them dumb shits don't know that

The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008. It was a component of the government's measures in 2008 to address the subprime mortgage crisis.

The MORONS have been ranting against their own guy all these years.

Bwahahahhaah.

And Michele Backman thinks she's so damned smart.

[brentspeak]

3. And the millions of people who lost their livelihoods and homes?

You think the "profit" made its way to them?

[Psephos]

6. well said n/t

[PoliticAverse]

4. Why did TARP show a paper profit? Because the real, $16 trillion bailout....

was done by the Federal Reserve.

See: http://www.sanders.senate.gov/newsroom/press-releases/the-fed-audit

[MannyGoldstein]

5. Beat me to it. nt

[Psephos]

7. everyone should read your Sanders link

thanks for posting

[progressoid]

12. ^^^this^^^

[stevenleser]

13. That's a totally separate issue and the two shouldn't be conflated.

The Federal Government Buying GM and similar companies and assets, returning them to health and selling them at a slight profit has nothing to do with what the Federal reserve did.

[MADem]

27. +1 ... shouldn't, but they will. Was it ever thus? nt

[earthside]

10. BS

Where was my 'bail-out'?

None of the 'profit' has made its way into my wallet.

[NobodyHere]

11. Most of the banks given TARP money weren't in trouble in the first place

So a profit is no surprise.

[Sunlei]

16. good they finally got rid of all those shares without a loss!

[bvar22]

17. Give me $100Billion at near 0%/yr......

...and I'll make money too!

[Nye Bevan]

18. What the whiners and naysayers are not considering

is how bad things would have become without TARP.

[JonLP24]

24. It saved the banks, not so sure about everyone else

Contributed to the wealth gap increasing. These guys gave themselves huge bonuses, donated almost half to political lobbying efforts & campaigns.. excesses & the kind of behavior that led to the crisis in the first place.

They gave away the money with little to no changes to regulations & consumer protections that would have prevented it in the first place. Luckily we had watchdogs like Elizabeth Warren.

"Too big to fail" is a problem that needs to be fixed, "too big too exist". I feel TARP was counter-productive, the entire layout was based in deception much like the Iraq War--"the sky is falling" we need it 3 days.. encouraging the risk. Letting them know the government will be there to cover their losses.

[candelista]

28. That's unverifiable.

It's just a statement of faith: woulda coulda shoulda.

[mathematic]

20. Thank God it passed!

Sure the guy that wrote that was trolling, but only because the serious brain-dead kneejerkism around here makes it so easy.

It's remarkable that a group of people that ostensibly believe in the effectiveness of government intervention in the market were so opposed to the actions of the government to avert a total seize-up of the financial system. It's nice that TARP turned a $15 billion profit and that number doesn't even include the benefit of not experiencing a collapse of the financial system.

I suppose it's too much to expect all the TARP mockers to acknowledge that it was a beneficial intervention. You know, "let it all burn" has never been and will never be the policy of the Democratic Party (and Thank God for that!).

[OrwellwasRight]

35. I believe in government intervention to help citizens.

Not to help corporate profits. The Great Recession was the biggest wealth transfer from working and middle classes to the 1% in US history. Where was the alleged help for "Main Street"? What about the families foreclosed upon? Those evicted from apts after job loss? The millions more who became eligible for Medicaid and food stamps because they were newly poor? What about the fact that real wages are actually down over the last six years for the bottom 90% of wage earners?

Nope. Fuck Wall Street and its "save us or we'll destroy the economy" mentality. They destroyed the economy anyway.

[doc03]

21. Here is kind of a crazy idea how about using that

$15.3 billion to improve the funding of the PBGC so retirees don't have their pension cut or terminated. I know that is too
much to ask since it would help just common ordinary peasants.

[JonLP24]

22. I wonder how much profit the CEOs ended with

I sort of know from the movie "Too big to fail" .. they made a killing but also saw the stat showing the government made their money back.

In any case, better than throwing trillions to private defense contractors.

[Thinkingabout]

23. Guess TARP turned out well after all, maybe some of the whining can turn to joy.

[IronLionZion]

25. When free market businesses get too "efficient"

I guess they need public funds to bail them out.

F the big banks, but I suppose its good that treasury helped the small community banks from collapsing.

Oh, and just in time for tea party to roll back more of the financial reforms so we can repeat all of this again in a few years.

[kentuck]

29. But, how much did the people lose??

Homes, savings, wages, investments, etc?

[Kelvin Mace]

30. But how much did the banks make?