Auto Bailouts and Campaign 2012
On TARP’s 4-year anniversary last week, the CBO released its latest cost estimate report for the massive $700 billion bailout fund.
The CBO revised its total cost to taxpayers down to $24 billion. According to CNNMoney, that’s a 25% reduction from its previous estimate. AIG assets that got sold account for the decrease.
But that is not the end of the story. Oh, no. There is much, MUCH more to the melodrama colloquially known as the ‘bailout of the big banks’.
TARP’s far reaching tentacles dig deep into the bowels of 2012 presidential election year politics.
TARP’s big bank bailouts and automaker bailouts are two entirely different animals. President Obama should get criticized, not praised over his role.
The Troubled Assets Relief Program (TARP) is part of the Emergency Economic Stabilization Act of 2008 signed into law on October 3rd, 2008 by President George W. Bush. Back then it was either sign it and disperse funds immediately or let credit markets freeze and tumble the world into a global depression. There was no alternative.
Outside of war, few actions taken by the federal government have generated more controversy and hatred than TARP.
The polar-opposite Tea Party and Occupy Wall Street movements share only one thing in common… they both hate TARP. Everyone, it seems, hates TARP.
Congress originally authorized up to $700 billion be spent. $466.42 billion was ultimately authorized. $417.26 billion has actually been spent. The CBO said it expects $14 billion more will be spent on TARP. By law, new TARP loans ended in October 2009.
Bailout of the Big Banks
The U.S. Treasury publishes The Daily TARP Update. It is an amazing little 1-page daily summary put out every business day since 2/9/2011.
The ‘bailout of the big banks’ is a set of four distinct bank loan programs collectively called “Bank Support Programs”.
$250.46 billion was obligated to those programs and, so far, $266.68 billion has been paid back.
Yup! That’s right, America! Taxpayers have, so far, made $16 billion off the big banks!
There is more yet to come in. Yippee!!
More on the Bank Bailouts
Every big bank has long since paid off its loans in full. There were no defaults.
However, there is still $9 billion in outstanding TARP bank loans. All of it is from the ‘little’ community banks we all like. None of it is from the hated big banks.
Big banks are identified by name in the daily report. For example, Bank of America was loaned $20 billion and paid back $22.95 billion. Its loan was paid off in 2010.
Taxpayers made almost $3 billion off of Bank of America.
If taxpayers get shafted, it won’t be by the big banks. We will be shafted by the little banks and automakers. In fact, the little banks, so far, have already cheated taxpayers to the tune of $3 billion. Automakers have cost taxpayers $7 billion.
The Automaker Bailout Bummer
The automaker bailouts is an entirely different story. They are TARP’s biggest failure. All is revealed in the daily TARP report.
President Obama negotiated a $79.66 billion bailout of GM and Chrysler. Both companies went bankrupt and defaulted their original loans anyway. As of yesterday, GM still owes taxpayers about $37 billion! GM, so far, has shafted taxpayers for over $4 billion that we will never see again.
In a negotiated TARP deal, Chrysler was sold to its workers. They, in turn, sold it to Italian automaker Fiat. Chrysler isn’t even an American company anymore.
In the end, taxpayers were left holding the bag for another $3 billion by foreign-owned Chrysler.
Taxpayers still own GM stock, but it is unclear if the stock holdings is enough to pay back in full the $37 billion still owed.
The CBO TARP report has a curious omission. It doesn’t include any of the nearly $42 billion in dividends and interest earned through TARP. If it did, TARP would already be declared a moneymaker despite the massive $22 billion in lost write-offs.
And the U.S. Treasury still owns many billions more in AIG and GM stock that will earn even more for beleaguered taxpayers from the TARP program. TARP is a success story.
The President and Vice President have trumpeted the bailout of the automakers as a shining example of successful Obama Administration economic policy. It is repeated over and over on the campaign trail and in the debates.
But if this is an example of sound economic policy then this country is doomed! Over $7 billion of the $80 billion in auto bailouts has already been lost in write-offs and there is still over $37 billion in loans outstanding. Chrysler isn’t even an American-owned company anymore.
Saving jobs is a good thing. Everyone agrees with that. TARP probably did save some jobs. How many, nobody really knows. It is nowhere near the 1 million claimed.
Ford didn’t take a dime of taxpayer money and is doing better in profitability than both GM and Chrysler.
President Obama should be hammered in campaign 2012 over this massive financial blunder, but isn’t. Why?