Cost of the Big Bank Bailouts!

Slipping through the cracks yesterday is a progress report from the U.S. Treasury Department on the overall cost to taxpayers of the bailouts of the big banks.

Remember that? You should. It spawned both the Tea Party and Occupy Wall Street movements. Big bank bailouts were universally hated. Discontent spread all across the land.

As a taxpayer, how much do you think the bailouts of the big banks cost you?

Yesterday’s report answers that question. It is called:
An Update on the Wind Down of TARP’s Bank Programs
– Timothy G. Massad, Assistant Secretary of Financial Stability, 12/18/2012

The surprise!

The big bank bailouts didn’t cost taxpayers one single penny. In fact, as of right now, taxpayers have raked in a profit of $23 billion.

Taxpayers made 9.4% in total interest profits from their involuntary bank investments.

How often do you know of that a government program actually makes taxpayers money? Not often. The big bank bailouts did. The auto bailouts haven’t. We will probably lose on that deal.

Yesterday’s report covers a subset of TARP spending dully titled “Bank Investment Programs“. That is what we call the bailout of the big banks!

TARP

2008’s Troubled Assets Relief Program (TARP) was created when the financial system was literally within days of total collapse. Without it most economists believe we would have fallen into a 1930s-like depression. Its bad enough as it is now!

Congress originally authorized $700 billion for the program. Ultimately $466 billion was obligated and $418 billion was actually spent.

It was for more than bailing out banks. The Obama auto bailouts, for example, were financed through TARP. The big banks, though, got the lions share of the funding at $245 billion. As of right now, they have paid back $268 billion.

The reason for the profit is simple. TARP is a loan program. It charges interest.

A handy-dandy, single-page summary report on TARP, like this one for 12/18/2012, is put out every business day by the U.S. Treasury.  They have done it for years. Each day’s individual report over the years can be found in the Daily TARP Update list.

The Disappointment of the Little Banks

Everyone likes the little banks. They are the local and community banks we walk into where a smiling, friendly bank official loans us large sums of cash to buy homes, cars and major appliances.

The little banks also got bailed out in the same bailout program as the big banks. They are listed on TARP’s Daily Report, too.

Compared to the big boys, the little boys got a pittance, $14.57 billion. However, of that, they still owe taxpayers $3.82 billion.  Otherwise, taxpayers would be up nearly $27 billion instead of only $23 billion. Bummer!

TARP Taxpayer Losses/Gains

Automakers Begging for Bailouts

It is instructive to compare the bailout of the big banks with other TARP bailouts:

  • -$39 Billion: Auto Bailouts
  • -$4.3 Billion: “Making Homes Affordable”
  • -$2 Billion: Public-Private Investments
  • -$3.82 Billion: Little Bank Bailouts
  • +$4 Billion: AIG Bailout
  • +$23 Billion: Big Bank Bailouts

The TARP auto bailouts helped get President Obama reelected. Taxpayers are still on the hook for a huge chunk of change (about $39 billion) on that deal. Taxpayers will lose money on it.

TARP bailouts for federal housing programs lost $6 billion. That program is closed. The money will never come back. Most of it was spent on the “Making Homes Affordable” program. Follow the link and the smiling faces you see are smiling because you, the taxpayer, gave them a $4.3 billion dollar freebie Christmas present!

A little bailout called “Credit Market Programs” still has about $2 billion left outstanding from a $19 billion original investment. Most of that is for public-private investments for which you, the taxpayer, instead of a private company has been left holding the bag.

The much hated AIG bailout is more complicated. The bottom line on that one, though, is that the Treasury has earned taxpayers $4 billion on that deal so far, with more to come.

Conclusions

Taxpayers are still on the short end of the stick when it comes to the TARP auto, little bank and other bailouts. Those lucky enough to snag “Making Homes Affordable” cash got $4.3 billion in free money. Thanks, Mr/Ms Taxpayer.

Ironically, profits made mostly from big bank and AIG loans will ultimately overcome TARP’s losses and put the entire TARP program in the black.

Next time the Occupy Wall Street and Tea Party Movement folks get the urge to put together hand-made placards and march around town chanting, “Banks got bailed out, we got sold out!”, they might wanna check their math first.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Dec 19, 2012, in bailouts, Business, Debt, economics, Life, news, Opinion, Politics, TARP, Thoughts. Bookmark the permalink. 5 Comments.

  1. I’m not sure about this, but didn’t the partial audit of the Fed show that they were handing out big bucks to the banks that was ot part of TARP?

    • The money shelled out by the federal government during the financial crisis is a complicated shell game. This article only speaks of one piece… TARP and big bank bailouts.

      The Fed has a whole series of things it did that added close to $2 trillion to it’s balance sheet over the last 3+ years.

      By far, the biggest culprits in the financial crisis I’m aware of are Fannie Mae and Freddie Mac… the GSE mortgage companies backed by federal government. They will cost U.S. taxpayers, one way or another, $100s of billions.

      But most of that is unrelated to TARP.

  2. Good summary of what happened with TARP–we made some money as taxpayers. That return however is not truly commensurate with the huge risk we taxpayers were taking. The higher the risk the higher the profit should be. We got a measly profit which is good, but given the risk we took, I wish it would have been much higher. The auto bailouts are probably the main reason Obama got re-elected carrying the auto states–the bailouts of the autos did not make economic sense but made political sense.

    • It has been my opinion ever since the big banks paid off their TARP loans fast (including huge amounts of interest) that they got a raw deal over the “bailout of the big banks”.

      You can’t feel sorry for a big bank, but if you want to trash them, then trash them for the right reasons!

      Don’t even get me started about the auto bailouts! 😉

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