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 Over the last few months there's been a number of stories about how the 2008-2009 bailouts have netted a profit for the Treasury and Federal Reserve.
   There are a couple problems with those stories:

1) they haven't netted a profit, and

2) the bailouts are far from over.

  There are also other smaller items of confusion that need to be sorted out. I'm going to try to clear some of this up.

#1: What was the cost of TARP?

  For starters, the bailout is/was both larger and smaller than the $700 Billion you remember.
   The version that passed Congress on October 3, 2008, was not the version that got implemented. It was changed almost immmediately.

  since Congress only authorized $350 billion to be lent out in 2008. The other $350 billion was saved for the new President when he took office in 2009. Obama never used the TARP funds to further bail out banks. Instead, he launched the $787 billion Economic Stimulus package. Second, the government bought bank stocks when the prices were depressed and sold later, when prices were higher. By 2012, banks had repaid $292 billion of TARP funds, leaving only $120 billion still outstanding. These funds were used for the HARP program, to help homeowners facing foreclosure.
 The amount of outstanding TARP is even narrower now and headed for an overall profit. Or is it?
   Like most things on Wall Street, there are hidden costs and losses not recognized until well into the future.
 The reality is that bailed-out firms essentially wrote off their losses on taxes. As of Dec. 30, TARP was still owed $67.3 billion, including $27 billion in realized losses — which is to say, that money is gone and is never coming back.
   Now, TARP is losing money as it tries to exit the programs.

    A new report by SNL Financial shows the Treasury Department is taking a beating in auctions of the Capital Purchase Program, one of the pipelines through which bailout money flowed.
    The auctions essentially sell off TARP debt and equity to private investors. Unfortunately, investors aren’t really interested in zombie-bank debt. It’s been selling at an 8% to 20% discount. The last auction, on Jan. 25, met with a 35% discount. In all, the latest CPP auction cost taxpayers $104.5 million.

 Because of accounting rules, those losses on TARP securities doesn't have to be recognized until it hits the market. Thus it might be several years before we know the final story of how much we lost on TARP.

   About 330 banks have exited the TARP bailout, but around 400 smaller banks still remain. The ones that remain are obviously the weaker ones. Of those, 162 are behind on their repayments.

  As for the TARP money moved to HARP, none of it will be repayed because it is a subsidy. The CBO estimated that $16 Billion of it will be spent.


  One last note about TARP, more than half of the 74 Senators who voted for TARP will no longer be in office by 2015. Only 7 of the 25 Senators who voted against TARP will have left office.

#2: How big was the bailout?

  Many are still under the impression that TARP = The Bailout.
In fact, TARP was only a small part of the Wall Street bailout. Most of the bailout was accomplished through the Federal Reserve.

 The net total? As of November 10, 2011, it was $29,616.4 billion dollars — (or 29 and a half trillion, if you prefer that nomenclature). Three facilities—CBLS, PDCF, and TAF— are responsible for the lion’s share — 71.1% of all Federal Reserve assistance ($22,826.8 billion).
 $29 Trillion is around twice the size of America's GDP.
  The Federal Reserve claims they only lent $1.7 Trillion to the big banks. Why the huge difference in totals? Because the Fed only counts the most outstanding at any one time.

  Here's a quick list of the Fed borrowers:

Citigroup - $2.513 trillion
Morgan Stanley - $2.041 trillion
Merrill Lynch - $1.949 trillion
Bank of America - $1.344 trillion
Barclays PLC - $868 billion
Bear Sterns - $853 billion
Goldman Sachs - $814 billion
Royal Bank of Scotland - $541 billion
JP Morgan Chase - $391 billion
Deutsche Bank - $354 billion
UBS - $287 billion
Credit Suisse - $262 billion
Lehman Brothers - $183 billion
Bank of Scotland - $181 billion
BNP Paribas - $175 billion
Wells Fargo - $159 billion
Dexia - $159 billion
Wachovia - $142 billion
Dresdner Bank - $135 billion
Societe Generale - $124 billion
"All Other Borrowers" - $2.639 trillion

 Behind the enormous sum, we find certain items of interest. Such as:

  The Fed paid $659.4 million in "fees" to these very same institutions during the period in question. This is not part of the bailout.

  You might have noticed that about $3 Trillion went overseas.

   The banks made $13 Billion from Fed below-market rates. This is not part of the bailout.

  The bailout of Fannie and Freddie (which directly assists the banking industry) is still negative $187 billion. They have returned none of the money yet. However, Fannie and Freddie have paid $50.4B in dividends to the Treasury.

   OK. So now we have the full picture, right? TARP bailout was a small loser on something around $600 Billion, while the Fed bailout was around $29 Trillion and pretty much a wash, right?

#3: When did the bailout end?

  First of all, the Fannie and Freddie bailout is ongoing, and coming straight from the Treasury Department (i.e. taxpayer money).

  Secondly, the Federal Reserve bailout of the Wall Street banks hasn't let up even a little bit.
   It sometimes takes the form of backdoor bailouts through the courts.

   But mostly the ongoing bailout takes the form of legacy costs.

  The growth of the Fed’s balance sheet means it could pay $50bn-$75bn a year in interest on bank reserves at the same time as it makes losses and has to stop sending money to the Treasury.
    In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”
 The Fed has payed the Treasury $291 Billion over the last four years from earnings on its ballooning portfolio. However, those assets, purchased through the multiple quantitative easing programs, were bought at a very low interest environment that won't last forever. When interest rates go up, those asset prices will drop fast.
    The Fed's costs of its ongoing Wall Street bailout is still completely unknown.
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Comment Preferences

  •  You're mixing up lots of different things in here. (2+ / 0-)
    Recommended by:
    Odysseus, Balto

    Most of 29 trillion were overnight loans. You can argue that the banks made some money on them but count them as cost at full value is ridiculous. Also, it's nothing special that the losses were written off on taxes. I do agree with your point about Fannie and Freddie. Where did you get the 600 bln loss on TARP from?

  •  Masters of the Universe? (4+ / 0-)
    Recommended by:
    gjohnsit, David Futurama, TheMomCat, emal

    Welfare Kings.

  •  gjohnsit - where does the auto bailout fit? (1+ / 0-)
    Recommended by:

    GWB lent $15 billion of TARP money to GM and Chrysler in Dec 2008 which was wiped out in the Chapter 11s. In addition, it appears that the balance of the auto bailouts are unlikely to be paid in full. What's the current analysis on how much the auto bailouts will cost in total?

    "let's talk about that"

    by VClib on Wed Feb 20, 2013 at 10:34:39 AM PST

    •  Still outstanding (5+ / 0-)

      The government is still holding some of those funds.

       I tried not to focus on the auto bailout because: 1) it was such a small part of the overall bailout, and 2) I actually agreed with that part of the bailout.

      ¡Cállate o despertarás la izquierda! - protest sign in Spain

      by gjohnsit on Wed Feb 20, 2013 at 10:38:00 AM PST

      [ Parent ]

      •  gjohnsit - Were the total TARP funds $80 billion? (0+ / 0-)

        I have read that the total TARP funding for the auto companies was $80 billion, which is a significant part of the TARP program. I know that much of that was turned into equity, and is not outstanding as loans. I too supported the auto bailout although I though that both GWB and BHO both made terrible deals on behalf of the taxpayers. How much is still outstanding and what do analyst think the total unpaid cost will be when the stock is sold?

        "let's talk about that"

        by VClib on Wed Feb 20, 2013 at 11:13:50 AM PST

        [ Parent ]

  •  Pardon my ignorance (2+ / 0-)
    Recommended by:
    ColoTim, Odysseus

    ...but I'm trying to wrap my mind around these numbers. The Fed bailout has been mostly in the form of overnight loans repeated every night for several years, correct?
    For example:

    Bank X needs 1bn to meet its reserve capital requirements on a particular day.
    The Feds loan Bank X 1bn for 24 hours to cover that requirement.

    The next day, Bank X is still in the same situation. After giving back the 1bn to the Feds, the Feds turn around and loan back the same 1bn for another 24 hours.

    Using the accounting that results in the 29 trillion number, the Feds have now loaned out 2bn, while in reality its only 1bn that has changed hands twice.

    Is that roughly how those numbers were arrived at? Please let me know if I'm totally off track.

  •  LOL! How many times have we blogged about... (4+ / 0-)
    Recommended by:
    gjohnsit, gulfgal98, katiec, emal

    ...these inconvenient truths over the past 5-6 years?

    (Gotta' laugh, because crying doesn't help.)

    And, how much bullshit propaganda to the contrary has appeared here/in the blogosphere and throughout the MSM about this; with the single purpose of misinforming the masses accordingly?

    Using EXTREMELY conservative estimates, taxpayers provide a minimum of $200 billion per year in "Wall Street welfare."

    Then again, the greater truth is that both major political parties in the United States are still all but completely captured by the 1%, political spin/propaganda to the contrary: "'Revealed: Why the Pundits Are Wrong About Big Money and the 2012 Elections,' Thomas Ferguson, et al."

    This is one of those BETTER EFFORTS to inform folks about it--at least those that don't deny reality!

    Thanks gjohnsit!

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Wed Feb 20, 2013 at 11:25:56 AM PST

  •  Diary a mess..... (0+ / 0-)

    First, the headline is misleading - "The total cost of the bank bailout" - and then you roll in AIG, the auto companies, Fannie and Freddie, etc.  Clearly not banks.  

    Second, the government made a profit, yes a profit, on the securities they purchased bailing out the banks, and, god forbid, even AIG.  Not to debate the merits of the auto bailout, but we are a long ways from getting our money back there, and from Fannie and Freddie.  And to the latter entities, the US Government had as much or more complicity in those problems than did the banks.  

    Third, the numbers you throw around do not tie to anything - you have  a graph with numbers that have no bearing or relevance to your arguments.

    Fourth, now we tread into the land of the absurd.  As others have pointed out, including the summation of all overnight loans made to the banks and equating that to a trillion dollar  "bailout" is just ridiculous.  At best you could argue that the exposure for one day is relevant, but still it is a loan, not a bailout.  And please note that every bit of that has been repaid.

    •  Wrong, wrong, and wrong (0+ / 0-)

      First of all, the diary was focused on the banks. I didn't roll in anything despite your assertion.
         Yes, I included AIG and Fannie and Freddie, because those bailouts went almost directly to the banks. To exclude them would have been dishonest. You are asking me to lie.

      Second, the government did not make a profit. I specifically explained why it did not. Either you didn't read my diary (which seems very likely), or you did not understand it, or you are asking me to lie again.

      As for the graph, it is obvious that you don't understand it.

      Finally, so much of the bailouts have not been repaid, it is absurd for you to claim otherwise.
       You obviously did not even bother to read my diary, and instead came in with an agenda to push. You have not impressed me at all.

      ¡Cállate o despertarás la izquierda! - protest sign in Spain

      by gjohnsit on Thu Feb 21, 2013 at 05:32:58 AM PST

      [ Parent ]

      •  So misguided... (0+ / 0-)

        Fannie and Freddie bailouts went to the banks?  Please provide a shred of evidence proving that?

        The bank investment portion of the TARP plan was profitable.  Full stop.  Clearly you did not read my comment.  

        When the financial services industry was on the verge of collapse during the height of the financial crisis, the Treasury infused banks with $245 billion to avoid an economic meltdown. To date, the Troubled Asset Relief Program has returned $268 billion in dividends, principal repayments and funding from assets the federal government has sold to private investors for a tidy profit of $23 billion.
        About $8 billion of its original principal investment is outstanding.
        So sure, there is still some money outstanding, but if it all goes away, there will still be a profit on those investments.

        You choose to ignore my response to your ridiculous assertion that you should add up all the overnight loans and consider the sum as part of the bank bailout.

        The bailouts that have not been repaid are Fannie, Freddie and the autos, and some of the banks.  The government has exited AIG at a profit, much to everyones surprise.  See link:  

        So overall TARP might still be showing a loss, but its not because the banks have not performed on their investments....

        •  this is what I expected (0+ / 0-)
          The bank investment portion of the TARP plan was profitable.  Full stop.
          No, not full stop for several reasons.

            First of all, TARP != the bank bailout. This simple confusion is the reason I wrote this diary. The bank bailout goes far beyond TARP.
              I specifically explained that in this diary, so it is obvious that you didn't actually read my diary (as I expected).

          ¡Cállate o despertarás la izquierda! - protest sign in Spain

          by gjohnsit on Thu Feb 21, 2013 at 12:39:04 PM PST

          [ Parent ]

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