Bailout final cost may be "only" $87B

[REWahoo]

Had we known it was going to be so cheap would we have made such a big fuss about it?

Treasury Secretary Timothy Geithner is telling Congress that the administration believes the final cost of the government's heavily criticized financial bailout effort could be as low as $87 billion.

Geithner made the new estimate in a letter Friday to congressional leaders that was obtained by The Associated Press.

A year ago, officials were estimating the bailout could cost as much as $500 billion.

Bailout cost may total just $87 billion

 

[Gumby]

"A billion here, a billion there, and pretty soon you're talking real money."

-- attributed to Senator Everett Dirksen


I'm just happy I was able to help out my buds at Goldman by honoring the AIG credit default swaps at 100 cents on the dollar.

 

[IndependentlyPoor]

I don't get it. Why wasn't the bailout structured so that the government had to be paid back as a condition for the companies survival? If we lent'em money, then I would think they must repay us or face bankruptcy.

 

[audreyh1]

I'm just happy I was able to help out my buds at Goldman by honoring the AIG credit default swaps at 100 cents on the dollar.

Yeah - that's the real rub! And here we go again with another round of huge GS bonuses since they made our like bandits through the govt-induced financial stability and recovery. Pun intended!

And would the companies have paid the bailout money back so fast if we hadn't raised such a stink and they hadn't felt pressure about bonuses, etc?

I think not!

Audrey

 

[Gone4Good]

I don't get it. Why wasn't the bailout structured so that the government had to be paid back as a condition for the companies survival? If we lent'em money, then I would think they must repay us or face bankruptcy.

Some of the companies have gone bankrupt, thus the losses. Other loans made profits.

 

[IndependentlyPoor]

Yes, but Fanny and Freddie are still in business.

From the article

In addition to the $117 billion in TARP losses, the administration is estimating losses of $85 billion from the support to Fannie Mae and Freddie Mac. Those two categories of losses would be offset by the $115 billion in earnings the administration expects will be realized from the Fed's support programs.

 

[audreyh1]

Some of the companies have gone bankrupt, thus the losses. Other loans made profits.

GM did go into bankruptcy. Came back out of it. Paid back all the govt loans this past week.

Audrey

 

[ziggy29]

Maybe, but I'm not sure I trust this number because there are obvious PR and political reasons for wanting to make this number appear as small as possible (like the CPI, hmmm?).

Funny how the bailout paybacks accelerated once executive pay and bonuses were threatened.

 

[Gone4Good]

Yes, but Fanny and Freddie are still in business.

From the article

Common equity was wiped out and the debt was always effectively guaranteed.

 

[Gone4Good]

GM did go into bankruptcy. Came back out of it. Paid back all the govt loans this past week.

Audrey

Didn't the U.S. take a hit on its pre-bankruptcy position in GM and Chrysler though?

 

[FinanceDude]

GM did go into bankruptcy. Came back out of it. Paid back all the govt loans this past week.

Audrey

Uh....no..........they did not..........

 

[IndependentlyPoor]

Uh....no..........they did not..........

I heard this too. Has anybody seen a story about this that seems well researched and believable?

First I saw the hype about repaying the loans.
Then folks started pointing out that most of the debt had been converted to equity.
Most recently, I saw somebody claim that the repayment actually came from other unused lines of government credit.

Eeewww!

 

[ziggy29]

Most recently, I saw somebody claim that the repayment actually came from other unused lines of government credit.

If true, that's not paying back debt. It's refinancing in order to eliminate the restrictions on executive pay.

 

[FinanceDude]

I heard this too. Has anybody seen a story about this that seems well researched and believable?

First I saw the hype about repaying the loans.
Then folks started pointing out that most of the debt had been converted to equity.
Most recently, I saw somebody claim that the repayment actually came from other unused lines of government credit.

Eeewww!

They took one TARP loan and paid it back with another TARP loan.hardly call that "paying it back"...........

 

[FinanceDude]

Here ya go:

http://http://blogs.wsj.com/washwire/2010/04/22/grassley-gm-uses-tarp-money-shuffle-to-pay-loans/

 

[REWahoo]

FD, that link doesn't work for me.

 

[Gone4Good]

Most recently, I saw somebody claim that the repayment actually came from other unused lines of government credit.

Eeewww!

The Chuck Grassely op-ed piece that makes this claim appears to be wrong. Even in his article he describes the repayment coming out of an "escrow" account. He claims it is TARP money, but typically escrowed money is borrower money, not lender money. And that is exactly what the Treasury Department told ABC news . . .

That cash has the same property status as the company's other cash – the only difference was our right to approve of its use for a limited period of time following the bankruptcy,” a department spokesperson said in an e-mail to ABC News. “This account was expected to be used for extraordinary expenses, and the fact that GM has decided that it does not need to reserve these funds for expenses is a positive sign for our overall investment.”

You'd think a ranking member of the Senate Finance Committee would understand how an escrow account works. I guess not.

 

[ziggy29]

The Chuck Grassely op-ed piece that makes this claim appears to be wrong. Even in his article he describes the repayment coming out of an "escrow" account. He claims it is TARP money, but typically escrowed money is borrower money, not lender money. And that is exactly what the Treasury Department told ABC news . . .

Frankly, I think the Treasury -- an arm of the administration, very much a political entity -- has at least as much incentive to spin it positively as Grassley does negatively. I trust neither of them to be entirely accurate.

 

[FinanceDude]

The Chuck Grassely op-ed piece that makes this claim appears to be wrong. Even in his article he describes the repayment coming out of an "escrow" account. He claims it is TARP money, but typically escrowed money is borrower money, not lender money. And that is exactly what the Treasury Department told ABC news . . .

So...we should believe everything the Treasury tells us?

 

[FinanceDude]

You'd think a ranking member of the Senate Finance Committee would understand how an escrow account works. I guess not.

I think I'd believe Barofsky over some anonymous "department spokesperson"...it's just spin..........

The govt still owns almost 61% of the "stock" of GM.when are we the taxpayer getting our money back from that? Pretty easy to show a profit when the govt has forgiven all your trespasses.........

 

[Gone4Good]

Both sides describe it as an escrow account. An escrow account is not a line of credit. This isn't complicated stuff.

 

[FinanceDude]

Both sides describe it as an escrow account. An escrow account is not a line of credit. This isn't complicated stuff.

WHOSE money is in escrow, GM's or the taxpayers? That is the question.

 

[Gone4Good]

WHOSE money is in escrow, GM's or the taxpayers? That is the question.

It seems as if Grassley isn't the only person who doesn't understand how an escrow account works. Money is held in escrow to protect the lender. Lenders don't escrow their own money. Why would they? If they're making other money available to a borrower, its called a line of credit. Not an escrow account.

And it doesn't matter how the escrow account is funded. If it was originally funded with borrowed money, and then used to repay the loan, the loan is still repaid.

 

[FinanceDude]

And it doesn't matter how the escrow account is funded.

You answered this exactly as I thought you would. However, there is a difference in how I see it. Chase Bank was made to take money from TARP. Jamie Dimon stuck it in his bank until he was allowed to give it back, repaying the "debt" the Treasury made him take in. He held the funds "in escrow" until he was allowed to pay it back.

Sorry, using TARP funds held in escrow to pay another TARP fund back isn't the taxpayers getting their money back, politics aside. The fact that GM is touting that they "paid their debt back" is even more ludicrous, given the fact that the govt still owns almost 61% of a company in stock that doesn't even trade on an exchange..........

 

[Gone4Good]

Sorry, using TARP funds held in escrow to pay another TARP fund back isn't the taxpayers getting their money back, politics aside.

I'm sorry but now you're just making stuff up. Are you saying that GM still has a loan outstanding? Can you show some evidence of this, because not even Grassley in his op-ed said that was the case. And if their is no loan outstanding, what exactly is your point?

The fact that GM is touting that they "paid their debt back" is even more ludicrous, given the fact that the govt still owns almost 61% of a company in stock that doesn't even trade on an exchange..........

It's not inconsistent to repay a loan while still having people own your equity. GM simply said they repaid the loan, which is true. You're trying to claim they said something else, which they didn't.

For what its worth, I don't really care one way or another. But it's just kind of astounding that people will go to extreme lengths (including, apparently, ignoring the plain meaning of words like "escrow") so that they can believe whatever they want to believe.