A Big Surprise: Troubled Assets Garner Rewards

[TomCADem]

Source: NY Times

American taxpayers are already poised to make unexpected billions from rescuing the nation’s banks. Now, they could reap another sizable profit from a government program devised to purge troubled real estate assets from the financial system.

The Obama administration made the so-called Public-Private Investment Program a centerpiece of its plan to help unlock the frozen credit markets in the spring of 2009, when a lack of buyers for complex mortgage securities threatened the health of the nation’s banks and put a drag on lending.

Under the program, the government provided matching funds and ultracheap loans to investment firms like AllianceBernstein and Oaktree Capital that agreed to buy mortgage securities from banks and other financial institutions.

Taxpayers stood to share in any of the profits, though the prospects of such a windfall were seen as secondary to the goal of unclogging the markets.


Read more: http://www.nytimes.com/2010/08/27/business/27toxic.html?_r=1&ref=business

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I guess this would come as a big surprise to Karl Rove, particularly since Hank Paulson proposed to simply use the TARP to buy the worst assets from the banks in a huge give away. Likewise, the media is generally ignoring the fact that it was good idea to save GM, rather than letting it be sold for its assets in bankruptcy. Of course, you won't hear this on Fox News or other right wing corporate media outlets, which will complain about the possibility of letting tax cuts expire on the richest Americans.

[Turbineguy]

1. Oh-oh! This is not good.

A government program under Obama that is working?

[Schema Thing]

2. I love that this comes out just after Boner calls for Geithner's head.

[Lightning Count]

3. So TARP was genius?

?

[No Elephants]

10. Not according to the OP article. The TARP was conceived by Paulson under dummya.

Op article says it was the Obama administration's twist on the TARP program that is supposedly turning out to be profitable.

[raouldukelives]

4. Awesome!

Our unexpected billions can go straight into social security!

[MannyGoldstein]

5. One simple question

All told, did taxpayers make money or lose money on the banker bailouts?

My imperfect understanding is that we lost hundreds of billions of dollars, and are risking trillions more com but i've never seen a definitive answer.

Does anybody have a full accounting?

[IScreamSundays]

6. No full accounting but...

An article that alleges we are rolling in the dough after bailing out the BBs.

I would like to send them my banking information so that they can just send my profits via auto-deposit.

[Igel]

7. It would only be a surprise to those not paying attention.

At the time the problem with the "toxic assets" wasn't that they were worthless. It's that nobody knew how to value them. Many were worthless. Many weren't. On the whole, they were considered undervalued. Then there were people like Stiglitz, who condemned it when they should have known better because, well, it fit their biases.

This article is a clue as to why most people believe Obama's responsible for signing TARP into law. It came out not so bad, and Obama took credit for much of it--as he largely should, since he actually asked for half of it to be approved by Congress and expensed most of the money after he was inaugurated. Then again, "TARP" is conspicuously absent from the discussion, even though this used TARP funding, helping explain why "TARP" is a bad word for many. The problem is that if TARP was bad, then it was bad; if it was good, then it was good. It forms one thing--it can be spun one way or another, but if you try to spin it both ways you get incoherence. That incoherence is reflected as inconsistency and contradictions polls.

Note that if TARP had simply bought the assets the net return would have been higher.

[Rage for Order]

8. I have a question

From the article:

Under the program, the government provided matching funds and ultracheap loans to investment firms like AllianceBernstein and Oaktree Capital that agreed to buy mortgage securities from banks and other financial institutions.

Taxpayers stood to share in any of the profits, though the prospects of such a windfall were seen as secondary to the goal of unclogging the markets."

Exactly how much money did the investment firms make from this "Public-Private Investment Program"? I wonder if they made more or less than we, the taxpayers, did?

[Turbineguy]

9. The head boy

from Oaktree was on CNBC a few days ago and said they'd doubled their money on one real estate fund buying distressed assets at rockbottom prices.

[No Elephants]

11. taxpayers made money? Did you get a check? I didn't.