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Bail-Out Profitable To Taxpayers
#1
Bad news for you S2 (I mean for your success in this debate of course).

What the article doesn't say is that the most important is not the profit (the profit is only one very surprising detail), the most important is the repayment of the principal.

Because all deficit forecasts assume that this money will never be repaid, not even one cent.
Yet it's already beeing repaid.

By JON HILSENRATH - The Wall Street Journal Wrote:Taxpayers are getting a reward for the trillions of their dollars U.S. authorities put at risk in a bid to save the financial system. But they still face big potential losses from the rescue effort, which will remain on the government's books for many years.

The government has collected billions since late last year from various rescue efforts, including dividends paid by banks receiving government capital, interest on mortgage-backed securities owned by the Federal Reserve and payments the Federal Deposit Insurance Corp. gets for guaranteeing bank-issued debt.

The total is in the neighborhood of $30 billion, though it is hard to attach a firm figure because each institution has a different way of counting. The Federal Reserve has more than $16 billion in net income for the first half of the year, over half of which is from various rescue efforts. The FDIC got over $9 billion for debt guarantees, and the Treasury has more than $9 billion in collections on rescue income.

The government didn't set out to turn a profit; it set out to prevent the collapse of the financial system and the damage that would have caused to the economy. Moreover, the government's earnings are minuscule, compared with the immense budget deficits, which will hit $1.6 trillion for this year, that the government is running.

The Treasury is sitting on some very large risks, including $248.8 billion in investments to banks and American International Group Inc. that haven't yet been paid back, and many of those banks are in a weaker position than those that have returned their Troubled Asset Relief Program money. It also has nearly $80 billion in investments outstanding to the still-troubled auto sector. And the Congressional Budget Office estimates that putting Fannie Mae and Freddie Mac, the two mortgage-finance firms, under government control will cost taxpayers $291 billion this year.

Still, profits earned in recent months on the government's intervention in the financial system suggest that the worst fears of massive losses from the rescues might not materialize.

"It is not a bad return for all of the extra added benefits [of stabilizing the financial system]," said John-Patrick O'Sullivan, a senior banking analyst at SNL Financial, a research firm specializing in banks.

More:
Chart showing the returns and risks involved in the U.S. financial rescue effort. Mr. O'Sullivan tracked the banks that received capital injections from the Treasury and have paid them back. He found that 34 firms had so far paid back $70.1 billion of TARP money. In addition, they paid $5 billion in dividends and for the redemption of stock warrants, which the Treasury demanded in exchange for its investments. Dividend and warrant payments from those firms worked out to a 7% annualized rate of return for the government on its investments, he estimated. In all, the Treasury says, it has received $9.5 billion in dividend and warrant payments.

Linus Wilson, an assistant professor at the University of Louisiana at Lafayette, estimated that the Treasury is also sitting on $14 billion in unrealized paper profits at Citigroup Inc. and $2.5 billion in paper profits at Bank of America Corp., whose share prices rallied after getting capital and broad guarantees against losses from the Fed and the Treasury.

The Federal Reserve earned $16.4 billion during the first six months of the year, even after accounting for a $5 billion drop in the market value of its holdings of assets from AIG and Bear Stearns Cos., it said. That included $4.6 billion in interest on holdings of mortgage-backed securities, $3.7 billion on interest in commercial-paper loans to individual companies and $1.9 billion on loans to other central banks.

On a portfolio that averaged $2.1 trillion, the net income in the first half of the year amounted roughly to a 1.5% annualized return, not a large return, but more than what the Fed would have earned had it put the same sum in short-term Treasury bills.

"The money-market mutual-fund industry would have loved to have earned one [percent] and change on its two trillion in assets," said Lou Crandall, economist with Wrightson ICAP, a Wall Street fixed-income research firm.
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#2
Quote:The government has collected billions since late last year from various rescue efforts, including dividends paid by banks receiving government capital, interest on mortgage-backed securities owned by the Federal Reserve and payments the Federal Deposit Insurance Corp. gets for guaranteeing bank-issued debt.

So, the Bush part of the bail-out is working?
I know you think you understand what you thought I said,
but I'm not sure you realize that what you heard is not what I meant!
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#3
Yes and the Obama's part is failing. That's what you mean?
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#4
I mean what I said:

Does the information you posted imply that the Bush part of the bail-out is working?


Why do you think the information implies that the Obama part is failing?
I know you think you understand what you thought I said,
but I'm not sure you realize that what you heard is not what I meant!
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#5
I am happy for the return on the first bail-out - but still realize it was not done perfectly. Letting Lehman Brothers go under was one example. This was under Timothy Geithner while Bush was still in office - but it was Waxman who was putting the knife in its back.

The New York Times Wrote:As the credit crisis erupted in 2007, Mr. Geithner found himself at the center of the effort to coordinate a response, the junior partner with then Treasury Secretary Henry M. Paulson Jr. and Ben S. Bernanke, chairman of the Federal Reserve. Together, they scrambled to save Bear Stearns, American International Group and Citigroup, while letting Lehman Brothers fail.
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#6
I'm amazed Waxman got time off while filming the latest Harry Potter movie. (Professor Filius Flitwick.)
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#7
JohnWho Wrote:I mean what I said:

Does the information you posted imply that the Bush part of the bail-out is working?

Why do you think the information implies that the Obama part is failing?
Why do you think the Bush part is failing, but the Obama part is working?
"You know, Paul, Reagan proved that deficits don't matter." Dick Cheney
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#8
quadrat Wrote:
JohnWho Wrote:I mean what I said:

Does the information you posted imply that the Bush part of the bail-out is working?

Why do you think the information implies that the Obama part is failing?
Why do you think the Bush part is failing, but the Obama part is working?

Only a fool would think I said that.

Oh, wait - it's Q.

Never mind.

:lol:
I know you think you understand what you thought I said,
but I'm not sure you realize that what you heard is not what I meant!
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#9
Is it because anything ever touched by Bush ended in failure, while the golden boy Obama can't do no wrong? That's too simple.
"You know, Paul, Reagan proved that deficits don't matter." Dick Cheney
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#10
quadrat stop baiting. You know the headlines are about the success of the Bush bailout package, as the banks have repaid all their government loans, plus interests - except for CitiBank which is still repaying some of the loans on a different schedule.

There is no argument that the Bush-Paulson bailout can now be thought of as a failure. All-in-all, it actually has raised revenue, instead of adding to any deficit.

The other Obama financial stimulus packages are another thing. They were sold as being a short-term trigger to turn around the economy immediately. After the eight-day emergency package was rushed through - the rhetoric changed, and the "stimulus packages" were redefined as long-term spending packages that won't even kick-in until long after the economy has already recovered on its own.
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#11
No, we both know the bank bailout was Obama's success. One of many, I might add.
"You know, Paul, Reagan proved that deficits don't matter." Dick Cheney
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#12
30 billion when we bailed out to the tune of over a trillion and the euros did the same to the tune of over a trillion euros and many more mortgages ready to default due to increasing unemployment.

On Wall Street things are looking up, but they never play with their own money anyway.

Things have not turned around yet boys, more is sure to come. China is not amused by our fiscal policy and since they hold so much currency they could probably single handedly start hyper-inflation of the dollar, which btw has been hovering steadily at 1.42 Dollars to Euro for a few weeks now.
"And down through the centuries the robes have never failed to keep the public at a respectful distance, inspire a decent awe for the professions, and impart an air of solemnity and mystery that has been as good as money in the bank. The four faculties of theology, philosophy, medicine, and law have been the perennial seedbeds, not only of professional wisdom, but of the quackery and venality so generously exposed to public view by Plato, Rabelais, Molière, Swift, Gibbon, A. E. Housman, H. L. Mencken, and others. What took place in the Greco-Roman as in the Christian world was that fatal shift from leadership to management that marks the decline and fall of civilizations." - taken from a speech by Hugh Nibley
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#13
Nice to see the banks are up and running profitable again. Can the same be said about their victims, the folks who lost their homes and livelihoods? If socialism for banks is working, why not try it for the whole of the economy, and every single American?
"You know, Paul, Reagan proved that deficits don't matter." Dick Cheney
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#14
The Bush bail-outs may work, but 2010 will see the Bush tax cuts expire and the Obama TARP taxes kick in.
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#15
Bush's bail out works (to the extent that it can be called Bush's because I don't think the latter did much himself, nor that O' did much either).

Yet, O's Bail Out may work even better in one year. Not because it's Obama-yo-Mama but because assets were bought cheaper at a later stage of the crisis and because the economy stabilize.

The Man
The gummint didn't Bail Out for one trillion but 600 billion. 100 billions ahve never been spent.
With all the repayment the final sum still out in the Bail Out is under 400 billion and decreasing.

The gummint could still lose money on AIG and GM thought.
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#16
This is nuts. We've drilled a $Trillion well and drained it absolutely dry. Now there are a few $billion puddles emerging at the bottom (from loans mandated by law to solvent banks to be paid back with interest as cover for institutions like shi ... oops I meant Citi Bank) and it's being touted as 'profit'?? Shock
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#17
mr_yak Wrote:This is nuts. We've drilled a $Trillion well and drained it absolutely dry. Now there are a few $billion puddles emerging at the bottom (from loans mandated by law to solvent banks to be paid back with interest as cover for institutions like shi ... oops I meant Citi Bank) and it's being touted as 'profit'?? Shock

Yak, that is what politicians do, and continue to do. They are whores. That is why I so vehemently dispise them. Granted, there are exceptions, but they are few and far between. And they do not stay there for long. They have certain principles to uphold.
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#18
How can anyone speak of any of these government administered patch jobs working, when in fact a reliable answer is still some years away!
"Only two things are infinite, the universe and human stupidity, and I am not sure about the former."

Albert Einstein
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#19
Mr Yak
I'm taliking about the total deficit or about all the ways your governement is wasting money left and right.

I was talking about what is known as The Bail Out aka TARP. The money spent -not allocated- in The Bail Out never exceeded $600 billion.
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#20
How can we reconcile the fact that constantly spending more than you earn w/o repayment causes bankruptcy for the individual,but,it is the way to prosperity for a state?

I just can't quite learn this piece of wisdom.
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