Thursday, January 10, 2013
New Jersey Senate President Stephen Sweeney discusses recovery along the state's coast, and whether or not he's planning a gubernatorial run this year. Plus: Eliot Spitzer on AIG's decision not to join a lawsuit over the federal bailout; analysis of Governor Cuomo's State of the State address; and the decline in international adoptions.
Thursday, September 06, 2012
(Paul Kiel, ProPublica) Quick, how many billions in the red are taxpayers on the bailout of GM? AIG? Fannie and Freddie? Is it true that the government has reaped a profit from bailing out the banks?
It should be easy to find answers to such questions. But while it's a snap to find rosy administration claims about the bailout, finding hard numbers is much more difficult. That's why, since the bailouts began in 2008, we've maintained a frequently updated site to provide them. Now we've retooled our database to make it even easier to find these sorts of answers.
So you can effortlessly discover that it's $27 billion for GM, $23 billion for AIG, $91 billion for Fannie, $51 billion for Freddie, and yes, the bank investments have so far returned a profit of $19 billion.
We also make it easy for you to see which investments have resulted in losses (39 so far in total) and to sort bailout recipients by how far in the red or black they are. As always, our scorecard page adds it all up and shows where both bailouts — the Troubled Asset Relief Program, better known as TARP ($55 billion in the red) and Fannie and Freddie (negative $142 billion) — stand right now.
Ultimately, the bailout of GM seems likely to result in the TARP's single biggest loss. But since the government still holds about a third of the company's stock (currently worth about $10 billion), we don't include it on our list of losers yet. It's possible the government will sell the stock for more than it's currently worth, recouping more of its investment.
For now, the reigning bust is the $2.3 billion investment in the bank CIT, which landed in bankruptcy less than a year after its bailout. Second on the list is Chrysler, which resulted in a $1.3 billion loss.
"The government's financial stability programs are expected to cost far less than many had once feared during the crisis, and we're continuing to make significant progress recovering taxpayer investments," said a Treasury spokesman.
Over time, that list of losing investments is likely to grow far beyond 39, because many of the smaller banks that have yet to repay the government are struggling. Although more than 300 banks have exited TARP (often repaying with money from another government bank program), nearly 400 remain. Of those, 162 are behind on their dividend payments to the Treasury Department. According to the GAO, the banks that are languishing in TARP tend to be weaker than those that have left, and at least 130 appear on a secret "problem bank" list kept by regulators.
The TARP's main bank program was supposed to be reserved for healthy banks, but among the losing investments are banks that were troubled even when they first received the money. Central Pacific Financial, a Hawaii bank, got its $135 million in early 2009 despite regulators having just ordered it to raise additional capital. As we reported then, the approval came two weeks after staff for Sen. Daniel Inouye, D-Hawaii, who had helped establish the bank and owned a large amount of the bank's stock, inquired about the bank's application for funds. Both regulators and Treasury denied that the inquiry affected their decision. Taxpayers ultimately lost $61 million from the investment.
Also notable among the failed investments is South Financial Group. The bank received a $347 million government investment in 2008 about a month after its former CEO, Mack Whittle, retired with a $18 million golden parachute. Taxpayers ultimately lost $200 million while the CEO kept his package. Contacted by ProPublica, Whittle said, "I founded [South Financial Group] in 1986 and take offense that anyone would imply that retirement benefits were not warranted." He added that the benefits had been negotiated long before he announced his retirement in the summer of 2008 and that he'd retired by the time the bank applied for TARP funds.
Of course, the government has already turned a profit on its bank investments overall, because the biggest bailouts — particularly Citigroup and Bank of America (each received $45 billion) — resulted in large profits. None of the banks remaining in TARP have net outstanding amounts over one billion dollars.
The Treasury wants to get rid of those remaining bank investments as soon as it can — even when that means selling stakes in apparently healthy banks for a discount, as ProPublica's Jesse Eisinger reported last month.
What defines a profit? So far, the Treasury has allowed many banks to exit TARP after receiving most, but not all, of the amount owed. But in cases where the Treasury received enough other revenue (e.g. through dividend payments) from the bank to result in a net gain, we label that investment as a profit. So far, that's been the case for 26 banks.
The final cost of the TARP, the Fannie, or the Freddie bailout isn't possible to know.
For the TARP, it depends on the biggest remaining investments: AIG and the remains of the auto bailout, GM and GMAC (now called Ally Financial). The net outstanding amount of those three companies together is about $61 billion. At this point, it seems likely that Treasury will ultimately recoup its bailout of AIG. The auto companies, on the other hand, seem likely to result in a loss approaching $20 billion, according to both Treasury Department and Congressional Budget Office estimates.
Another big factor is the TARP's housing programs, its mortgage modification program chief among them. Although Treasury set aside more than $40 billion for its various initiatives, less than $5 billion has been spent so far, a testament to the limited reach of the programs. Since those are subsidies, none of that money will be repaid, and any spending ups TARP's tab. Earlier this year, the CBO estimated that ultimately $16 billion would be spent.
Of course, all of these numbers benefit from being put in a broader context. The Obama administration argues that the TARP should be credited with blunting the force of the financial crisis and saving "more than one million American jobs." Critics like former TARP inspector general Neil Barofsky say the program may have stemmed the damage from the crisis, but it did so by largely preserving the broken too-big-to-fail system that caused the crisis. It's also worth mentioning that the Federal Reserve played an enormous role in supporting the biggest banks and allowing them to exit TARP.
The fate of the Fannie and Freddie bailouts is even harder to figure, although the Treasury recently announced that all of the companies' profits from now on will be handed over to Uncle Sam each quarter. Their tabs should decrease, but how quickly and for how long they'll be allowed to exist is unclear.
For now, our site provides a snapshot of the two bailouts as they actually stand. We've been at it since 2008, and we'll continue to update it frequently.
Wednesday, March 07, 2012
The Treasury Department is launching a sale of $6 billion of the $41.8 billion in common stock it holds in insurance giant American International Group Inc., which received the biggest bailout of the financial crisis in 2008.
Tuesday, September 20, 2011
By Anna Sale
Texas Gov. Rick Perry comes to Wall Street to raise campaign cash. Republicans in Pennsylvania want to divide up the state's electoral votes by Congressional district, while Republicans in Nebraska want to return to the winner-take-all approach. And Maine voters debate a people's veto of a new same-day registration law.
Monday, August 08, 2011
In an exclusive story in The New York Times this morning, Wall Street and finance reporter Louise Story writes that the behemoth insurance company American International Group Inc. is going to sue Bank of America, claiming the banking institution provided false information on mortgage bonds to AIG and ratings agencies, which lead to losses of more than $10 billion.
Thursday, July 07, 2011
American domination weakens and the Chinese gain a stronger foothold in the rankings of the world's 500 largest companies.
Thursday, April 28, 2011
In 2008, the government offered an $85 billion bailout to American International Group Inc., one of the world's largest insurance companies, in order to prevent its collapse. When AIG accepted the bailout, it waived its right to sue banks over most of the mortgage securities that it had acquired. But, it did not give up its right to pursue legal action regarding $40 billion of mortgage bonds it purchased directly from banks. In an exclusive story for The New York Times, finance reporter Louise Story explains how AIG is now going after hedge funds and banks to try to recover billions in losses related to mortgage securities that caused the financial collapse in 2008.
Friday, April 15, 2011
Cuomo was really one of earliest to start looking at mortgage securities. He subpoenaed all of the banks and rating agencies back in the summer of 2007, before people really realized we were having crisis. There was all this information about how they were packing loans into mortgage bonds, but that's something he never brought a case in. He had all that information showing just how much banks knew about how crummy those loans were.
— Louise Story, New York Times Wall Street and Financial reporter, on The Brian Lehrer Show.
Friday, October 01, 2010
Insurance giant AIG has reached an agreement and a plan with the federal government to pay back some $70 billion given to the company in 2008 as part of the Troubled Asset Relief Program, just before their two-year deadline on October 3. Under the agreement, the Federal Reserve Bank of New York will remove it's ties to American International Group, and the Treasury will increase it's stake to 92 percent, gradually bringing the shares it owns from preferred to public to transfer the control back out of government hands. But is the public buying? Louise Story gives us the latest.
Thursday, September 30, 2010
Remember AIG? It was once the world's largest insurer, and two years ago this month, at the height of the financial crisis, it got a multi-billion taxpayer bailout to save it from collapse. Today, the company announced a plan to repay taxpayers and bring government ownership to an end. The company's CEO, Robert Benmosche, called the agreement a "pivotal milestone."
Wednesday, June 30, 2010
Louise Story, finance reporter for The New York Times, co-reported on a big story in today's paper. In the fall of 2008, when the government propped up A.I.G. with billions of taxpayer dollars, the insurance giant was forced to forfeit its right to sue the very banks which helped drive it into the ground.
A.I.G. investors and executives alike have been frustrated over their lack of legal recourse against big banks, including Goldman Sachs, for insuring over-leveraged mortgage backed securities with them. However, after the Securities and Exchange Commission filed a civil suit for fraud against Goldman Sachs in April accusing the bank of misrepresenting a mortgage deal to investors. A.I.G. is now examining the idea of filing its own suit against Goldman. Was A.I.G. indeed misled by Goldman into insuring mortgage deals that the bank knew were flawed?
Tuesday, June 01, 2010
A.I.G.'s board has rejected a plan to sell its Asian life insurance arm to Prudential, which would have provided the U.S. government with its first major bailout repayment. The New York Times finance reporter, Louise Story, explains why A.I.G.'s shareholders are holding out and what this means for the taxpayer.
Monday, March 01, 2010
AIG will sell the Asian arm of its life insurance business to British insurance giant, Prudential P.L.C. This international sale is the biggest since AIG was bailed out by the U.S. government in 2008 and will help the company repay some of its bailout money.
Wednesday, January 27, 2010
- MONEY TAKEOUT: New York Times business and finance reporter Louise Story previews some of the revelations set to unfold as the House begins hearings into the government's bailout of AIG.
- SPORTS TAKEOUT: The Takeaway's sports contributor Ibrahim Abdul-Matin recaps the latest in tennis's Australian Open.
- LISTENERS TAKEOUT: In advance of the President’s address tonight, our listeners describe the state of the union in six words.
Monday, June 08, 2009
For more, read Louise Story's and Eric Dash's article, U.S. to Propose Wider Oversight of Compensation, in the New York Times.
Thursday, March 19, 2009