"Bank bailouts appear to be paying off."

[Clio the Leo]

Bank bailouts appear to be paying off
The U.S. gets billions back as Wall Street rebounds. But critics say the TARP fund will still end up in the red.

By Jim Puzzanghera and Walter Hamilton

December 4, 2009

The government's bailout of the banking system is turning out to be far from the fiscal sinkhole so many had feared.

The $700-billion Troubled Asset Relief Program, known as TARP, was reluctantly created by Congress last fall despite criticism that it was a huge risk that would only encourage the profligate ways of Wall Street. But in recent months, tens of billions of dollars have begun flowing back from banks to the U.S. Treasury.

Bank of America Corp.'s decision this week to repay one of the largest chunks -- $45 billion -- reflects the stunning turnaround of the financial industry and demonstrates that the government's unpopular medicine appears to have saved the patient. And the price tag isn't as large as expected.

"It turns out, actually, TARP -- as wildly unpopular as it has been -- has been much cheaper than any of us anticipated," President Obama said Thursday at a White House summit on creating jobs.

Federal Reserve Chairman Ben S. Bernanke, who pushed for the fund's creation, made a similar point at a Senate hearing Thursday on his nomination to a second term.

"Unlike some of the scare stories about $700 billion being thrown away, I do believe . . . in the end that there'll be something close to a break-even there," Bernanke said.

The TARP fund may break even, that is, on its first and biggest use of taxpayer money: investing billions -- $205 billion as of Monday -- directly in banks.

Including Bank of America's expected repayment, $116 billion -- more than half -- of that amount has already come back to the government, along with about $10 billion in dividends and interest.

http://www.latimes.com/business/la-fi-tarp4-2009dec04,0,5593349.story

[dionysus]

1. well well well. did heads explode for nothing?

[NJmaverick]

4. Yes that does appear to be the case

[no limit]

6. I guess if you think handing over a trillion dollars with no strings attached "worked"

then please, pass me what you are smoking.

Banks making insane profits using our money doesn't define success for me. Maybe I'm crazy.

[Skittles]

8. exactly

[dionysus]

10. we're getting money back on it, and as crappy as it it is the alternative would have been

the collapse of almost the entire banking industry and a global depression.

i take it you would have preferred that, just to spite them?

[no limit]

13. We could have got a lot more out of it, and we could have set up much tighter regulations

we didn't.

Now the banks raked in billions of dollars in profits off the TARP money we gave them while they deny most people basic loans. Meanwhile the problems that lead to this mess in the first place have not been addressed.

This was an absolutely failure to anyone outside of wall street. We got raped, and there is no gurantee we won't be raped again.

[dionysus]

14. i agree about regulations, but the bailout was necessary to prevent total collapse.

it should have had better(some?) oversight, but it was needed.

[Kahuna]

15. Yep. I don't get what part of that people don't get. Without healthy financial

institutions our entire economy would collapse. Duh.

[no limit]

16. Nobody is arguing we didn't need some kind of bailout. This is a false argument.

What if we gave the banks 2 or 3 trillion dollars. Using the logic of the article in the OP that would have worked too since the banks would have made even more money. You can't look at success based on how much money these banks made, it is intellectually dishonest to do so.

The fact is this didn't work. Yes, it stopped the banks from failing but it did nothing to fix the system. There were many different ways of making sure those banks didn't fail while fixing a broken system and giving the tax payer a lot more bang for the buck. Now we still have the same system that got rewarded for destroying our economy with a trillion dollars of tax payer money. Meanwhile very little money went to bailing out main street which still suffers today.

[doc03]

11. The unemployment rate isn't 100% because of the

TARP, it saved the world from total meltdown.

[msongs]

2. the people who were cheated out of their money by banks will rejoice nt

[HughMoran]

3. Long term versus short-term thinking?

Long term thinking is generally punished in the short term, lauded in the long term. This is up there with the least popular things done so far to counter the pending depression, but it may not end as bad as it started - we'll see.

[Peacetrain]

9. It very much is long term vs short tem.. kind of like a shot to fend off flu

It takes time to go to the doctor, and getting a shot is no fun, sitting in the office etc.. but the benefits of not getting the flu are huge.. and on that same thought process.. many people will probably never even realize how bad things were or the hole we could have fell through.. Because we didn't.. we took the steps necessary to protect the economy on a nation wide and global level

[brentspeak]

5. Report: 34 banks don't pay their quarterly TARP dividends

http://www.usatoday.com/money/industries/banking/2009-10-07-banks-tarp-dividends_N.htm?csp=34

AIG and CIT included.

[Kdillard]

7. Thanks k and r.

[mopinko]

12. the fact that it was always discussed as a gift instead of a loan always

pissed me off. granted that the payback wasn't guaranteed, since the banking system could have collapsed anyway. but still. the intellectual dishonesty of it.

[no limit]

17. It was a gift. If you "lend" someone a trillion dollars with virtually no string attached

and almost no interest then that someone will make a shit load of money. If the government gives me 100 billion and says do what you want with this money, hopefully you eventually pay us back. And 6 months later I make 200 billion with the 100 billion the government gave me then this is a gift, not a loan or investment as they tried to describe it.