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Old 10-20-2010, 12:44 PM   #21
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Well that could work, except that wasn't really the program now was it?
No, but the point was simply to showcase how corporate "leaders" are motivated. There's no way, IMO, that TARP recovers as much cash as quickly as it did if there were no provisions to restrict executive compensation until all loans are paid off. And I think that's instructive for future reference.
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Old 10-20-2010, 02:15 PM   #22
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And the endless stream of whiny-assed CEOs on CNBC has made for great theater...
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Old 10-20-2010, 02:32 PM   #23
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Well that could work, except that wasn't really the program now was it?

And I'm not aware of anyone claiming that the government extorted above market prices on the repayment of warrants and the like. In fact, companies had the option of letting the Treasury auction off their securities if they couldn't agree on a price to repurchase them. Several banks did just that. With such a system either the banks bought the securities at a price they found attractive, or the Treasury got a true market price. That doesn't sound much like a "fee" to me.

But I find it interesting that we've reduced a large program to one of its most trivial parts, and are now pretending that that part represents the whole. I guess its easier to do that than admit the program not only achieved its stated objective, but did so at a profit for taxpayers.

The extortion part was them forcing all the big banks to take the money... Not all banks needed the money... but they had to pay to get that 'capital' even if they did not need it or could use it for investments..

I did not read the article... so I do not know if they are doing some funny accounting... remember that the auto firms got a lot of debt forgiven when they went through BK... at the end of the day maybe they will pay it all back, but who knows...


Now all we have to do is not allow the politicians to spend it on something else and claim that it was already spent...
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Old 10-20-2010, 03:12 PM   #24
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TARP Returns 8.2% profit to taxpayers, beating treasuries



If only we had more "spending" programs like this one, we'd have a balanced budget in no time.
I saw this article today and assumed you'd post it here

Quote:
While banks can borrow at close to zero from the Fed, they lend to consumers and corporations at almost 5 percent, or to the Treasury at 2.5 percent, and they get to keep the difference.
“The huge wealth transfer from fixed-income pensioners to the banks has helped the banks repay TARP,” Petzel said.
Quote:
Even though some of the support has been withdrawn, part of it will likely be lost, such as the hundreds of billions of dollars put into Fannie Mae and Freddie Mac, she said.
“These are all indirect subsidies the banks got,” Prins said. “So the TARP gains touted by the Treasury are only true if you ignore all the other costs.”
So i assume that by "in no time" you mean never.
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Old 10-21-2010, 12:47 PM   #25
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TARP Returns 8.2% profit to taxpayers, beating treasuries



If only we had more "spending" programs like this one, we'd have a balanced budget in no time.

Opps... mabye they spoke to soon.....

Fannie and Freddie may need another $215 billion - Yahoo! News


Fannie and Freddie may need another $215 billion
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Old 10-21-2010, 12:50 PM   #26
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Sounds like we need to cap the pay of Fannie and Freddie execs, too...
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Old 10-21-2010, 03:42 PM   #27
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Sounds like we need to cap the pay of Fannie and Freddie execs, too...
Hmmm. I don't have the time (or the resources -- still "on the road") to research further but this may be a place to start:

Fannie Mae Salaries | Glassdoor.com
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Old 10-21-2010, 08:21 PM   #28
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Sounds like we need to cap the pay of Fannie and Freddie execs, too...
Fixed.
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Old 10-27-2010, 03:14 PM   #29
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Opps... mabye they spoke to soon.....

Fannie and Freddie may need another $215 billion - Yahoo! News


Fannie and Freddie may need another $215 billion
Fannie and Freddie aren't part of TARP. Their debt was basically sold as "government debt" and was always assumed by buyers to be guaranteed, even though it never explicitly was. Running these things that way was a very bad idea, but it has nothing whatsoever to do with TARP.
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Old 10-27-2010, 03:21 PM   #30
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I saw this article today and assumed you'd post it here

So i assume that by "in no time" you mean never.
You didn't link the entire article, so I can't critique it, but claiming the Fed lowering rates is somehow a cost that should be added to TARP is a really strange argument, and an even stranger accounting. The term 'non sequitur' comes to mind.
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Old 10-27-2010, 04:53 PM   #31
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Fannie and Freddie aren't part of TARP. Their debt was basically sold as "government debt" and was always assumed by buyers to be guaranteed, even though it never explicitly was. Running these things that way was a very bad idea, but it has nothing whatsoever to do with TARP.

Sooooo, creative accounting IMO... so maybe TARP might be close to breaking even, but the country is still a few hundred billion in the hole due to the financial crisis....


Kind of like "I won $200 on the lottery" without netting all the 100s lost prior to that win...
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Old 10-27-2010, 05:17 PM   #32
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Sooooo, creative accounting IMO...
Not really. The thread is about TARP not "everything the government does that we don't like, and TARP."

Creative accounting would be to add costs not associated with the specific program.
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Old 10-27-2010, 09:17 PM   #33
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Creative accounting would be to add costs not associated with the specific program.
Or to not include costs that should be included.

From the 16 Sep 2010 Report of the Congressional Oversight Panel (COP), the views of J. Mark McWatters and Professor Kenneth R. Troske (emphasis added):

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- Repayment by TARP recipients of advances received under the program is a misleading measure of the effectiveness of the TARP and therefore should not serve as the standard by which the TARP is judged.

- According to the Congressional Budget Office, the bailout of Fannie Mae and Freddie Mac is projected to cost more than five times the projected cost of the TARP, including the Capital Purchase Program employed by Treasury to bail out over 700 financial institutions. TARP recipients and other holders of GSE-guaranteed MBS who benefitted from the bailout of the two GSEs are not required, however, to share any of the costs
incurred in the bailout.

- The bailout of Fannie Mae and Freddie Mac permitted TARP recipients to monetize their GSE-guaranteed MBS at prices above what they would have received without the GSE guarantee and use the proceeds to repay their obligations outstanding under the TARP, thereby arguably shifting a greater portion of the cost of the TARP from the TARP recipients themselves to the taxpayers. Costs such as this should be included when evaluating the TARP.

- The TARP created significant moral hazard risks and all but enshrined the concept that some financial institutions and other business enterprises are too big or too interconnected to fail.
Similar views are expressed in the main body of the report. (See the section on "Costs of the TARP" beginning on pg 95).

TARP is inextricably linked with the costs that we've paid and will pay for the bailout of the GSEs, and to claim that the TARP costs are independent is clearly inaccurate. From the report (starting p 127), emphasis added:

Quote:
In our view, Treasury is struggling to convince the American public of the TARP‟s success by advocating the acceptance of a metric – whether or not the TARP money has been repaid – that is simply not a credible measure of success. Professor Kenneth Rogoff addressed this issue in his written submission to the Panel where he states:
"A proper cost benefit analysis thus needs to price the risk the taxpayer took on during the financial crisis. Ex post accounting (how much did the government actually earn or lose after the fact) can yield an extremely misguided measure of the true cost of the bailout, especially as a guide to future policy responses.398"
2. The Bailout of the GSEs and its Consequences to TARP Recipient
s
One of the important ways this metric can be misleading is if other government programs that are not part of the TARP either directly or indirectly enhanced TARP recipients‟ ability to repay the government. One program that has potentially played a key role, but has received
relatively less attention, is Treasury‟s bailout of Fannie Mae and Freddie Mac.399 . . . . As it was, Treasury stepped in and provided unlimited support for all outstanding MBS guaranteed by Fannie Mae and Freddie Mac.
In addition, the Federal Reserve has recently purchased $1.25 trillion of GSE-guaranteed MBS in the secondary market from TARP recipients, other financial institutions and other investors and issuers.401 . . . .
The bailout of the two GSEs by Treasury thus had the potential to shift losses suffered under the TARP to losses suffered by another Treasury program that has not been subject to the same oversight or public scrutiny.404 As this example illustrates, any evaluation of the success of the TARP has to take into account the interaction among all government programs designed to prop up the financial system and how costs may have been shifted among these programs.
TARP isn't close to being paid off. Much of the cost and risk for TARP was shifted to other portions of the bailout scheme (see above). And we won't know the true bill for the enhancement of moral hazard spawned by TARP (the program's most important legacy) until the next big financial derailment.

So, three Bronx cheers for TARP.

Folks who want more govt involvement in the financial system should look for a prettier poster child. Maybe FDIC . . .
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Old 10-27-2010, 09:43 PM   #34
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TARP is inextricably linked with the costs that we've paid and will pay for the bailout of the GSEs, and to claim that the TARP costs are independent is clearly inaccurate.
This represents muddled thinking. The GSE (Government Sponsored Entities) benefited from an implicit guarantee that pre-dates TARP. How can TARP be responsible for obligations that were incurred before its creation? The answer, it can't.

And it doesn't matter at all that TARP recipients benefited from GSE support because the U.S. government was already committed to supporting the GSE regardless of whether TARP existed or not. It's also true that TARP recipients benefited, and continue to benefit, from the U.S. government's decision to honor principal and interest on Treasury obligations. Should these costs also be included in TARP? The idea is preposterous.
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Old 10-27-2010, 09:50 PM   #35
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This is clearly not true. The GSE (Government Sponsored Entities) benefited from an implicit guarantee that pre-dates TARP. How can TARP be responsible for obligations that were incurred before its creation? The answer, it can't.
The TARP "repayments" occurred largely because of funds the government spent (and continues to spend) in other portions of the bailout. The risks and costs for TARP have been shifted. If you disagree, write a letter to Congress, it's their experts and their oversight report with which you have a quarrel.
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Old 10-28-2010, 07:45 AM   #36
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The TARP "repayments" occurred largely because of funds the government spent (and continues to spend) in other portions of the bailout. The risks and costs for TARP have been shifted. If you disagree, write a letter to Congress, it's their experts and their oversight report with which you have a quarrel.
Any report that claims honoring a pre-existing guarantee is a cost to a program that came into being well after that guarantee was established has clear logic problems at its core.

By this "cost-shifting" 'logic', any action taken by the government that impacted TARP recipients should be treated as a "cost" of TARP. That list is endless . . . tax cuts of any kind, unemployment insurance extensions, Social Security payments, treasury bond payments, government salary payments, all flow, in some measure, to TARP banks. Through this "six degrees of separation" accounting we could almost certainly conclude that the entire world GDP is, really, a cost of TARP (U.S. Aid to Africa, supports African agricultural exports, which raise the value of the S. African Rand, which increases the value of South African development loans made by Citigroup. So it "logically" follows that U.S. Aid to Africa is really a cost of TARP as well). Obvious nonsense.
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Old 10-28-2010, 02:35 PM   #37
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This represents muddled thinking. The GSE (Government Sponsored Entities) benefited from an implicit guarantee that pre-dates TARP. How can TARP be responsible for obligations that were incurred before its creation? The answer, it can't.
Hey, no fair! This is a political issue, so we get to make up any rules we like along the way, and redefine words to mean whatever is handy.

In general, what passes for 'accounting' among politicians would land a CFO in prison. Yes, I'm pretty much fed up with all the crazy bullpuckey appearing in various media recently, and very much doubt that I'll see any improvement in what passes for budgetary practices after the next election.

New Improved Federal Budget! Now with Muddled Thinking!
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Old 10-29-2010, 10:05 AM   #38
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Well, it seems that even TARP is not going to end up making money... (my bold)...


"Treasury's authority to spend more from the $700 billion fund expired on Oct. 3. The law requires officials to recoup as much as possible of the $185 billion still in the hands of shaky private companies. After all collections are made, the government expects to be out about $51 billion, mostly from housing programs."



SPIN METER: Despite claims, bailouts not over yet - Yahoo! News
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Old 11-03-2010, 03:55 PM   #39
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"Treasury's authority to spend more from the $700 billion fund expired on Oct. 3. The law requires officials to recoup as much as possible of the $185 billion still in the hands of shaky private companies. After all collections are made, the government expects to be out about $51 billion, mostly from housing programs."
Yes, that's the same $50B estimate that I used to start this thread.

It's still an incredibly small price to pay to keep the entire financial system from melting down. I wonder how much tax revenue would have been lost (and how much more Fannie's and Freddy's pre-existing guarantees would have cost ) if TARP hadn't passed. As it is, tax revenues are down $400B as a result of the recession. It's hard to argue (although I'm sure some will) that Government revenues would have been higher, or the GSE's guarantee costs lower, if TARP never existed.
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Old 11-03-2010, 04:20 PM   #40
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Well, it seems that even TARP is not going to end up making money... (my bold)...


"Treasury's authority to spend more from the $700 billion fund expired on Oct. 3. The law requires officials to recoup as much as possible of the $185 billion still in the hands of shaky private companies. After all collections are made, the government expects to be out about $51 billion, mostly from housing programs."



SPIN METER: Despite claims, bailouts not over yet - Yahoo! News
Heck, it's only 50 billion that's not a lot of money to the Administration..........
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