Monday, December 16, 2013
Though Detroit seems to be in dire straights with its recent bankruptcy filing, there might actually be another piece of America that’s even worse off: Puerto Rico. The U.S. territory is facing massive debt, a potentially crippling bond ratings cut, a gaping hole in its massive pension fund, and a towering unemployment rate bolstered by federal entitlements. Ingrid Vila, chief of staff to Puerto Governor Alejandro Garcia Padilla, joins us to discuss Puerto Rico's options.
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.
Tuesday, September 04, 2012
By Kate Hinds
The recovery has been very good to the U.S. auto industry.
General Motors said Tuesday its August sales were double the company's expectations and are up 10 percent over 2011 numbers. Ford reports its numbers were up 13 percent. And Chrysler had its best August in five years, posting gains of 14 percent.
These numbers come at a fortuitous time for President Obama, who is making the $85 billion bailout of the auto industry a key talking point of his re-election campaign. Speaking Monday at a United Auto Workers rally in Ohio, Obama told the crowd: "If we had turned our backs on you, if we had thrown in the towel like that, GM and Chrysler wouldn’t exist today."
Read more about auto sales at NPR.
Monday, July 30, 2012
Neil Barofsky was appointed to be the Special Inspector General in charge of Troubled Asset Relief Program (TARP), and he describes the ways of Washington and the mishandling of the $700 billion TARP bailout fund. In Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, he reveals the ways he thinks government officials bent over backward to serve the interests of Wall Street firms at the expense of the broader public—and at the expense of effective financial reform.
Tuesday, July 24, 2012
Neil Barofsky, the man put in charge of the Troubled Asset Relief Program (TARP), thought the Bush and Obama Administrations wanted a tough regulator. As Barofsky tells it, he couldn't have been more wrong.
Tuesday, June 05, 2012
The layers of irony could scarcely be denser. Buoyed in part by automobile hiring, employment in swing states looks far better than the nation as a whole, providing a possible path to victory for President Barack Obama, who bailed out the big three auto manufacturers with a clothespin on his nose.
In Michigan, Ohio, Indiana and Missouri, the auto industry has been adding jobs at rapid clip, according to the Bureau of Labor Statistics. So that even though things were really bad in those states, they're now less bad. Which is good news for the President.
"We know that this thing is going to be super tight," said a senior Democratic official. "But we are absolutely of the belief that the swing states jobs numbers will be determinative in the fall."
By now, the national narrative is well known. May's employment numbers were meh, signalling a heap of trouble for the President. "He is the underdog," opined NPR's Mara Liasson, who then ticked off things that could only make the electoral picture worse for the Democrats: the Euro crisis, the Chinese economy, etcetera. That pretty much sums up the conventional wisdom.
In the swing states, things are markedly better than they were two years ago, and in many of them, the employment picture is a whole lot brighter than the nation as a whole.
Take Michigan and Ohio. According to April data from the Bureau of Labor Statistics, both of those key states have "statistically significant unemployment rate changes" over April of last year. (May data won't be out until the end of next week.) Ohio's rate is down 1.4 percent from last year, Michigan's is down 2.2 percent.
And even though Michigan's unemployment rate, at 8.3. percent, is a tick over the national average, that doesn't much matter, according to Howard Wial, a Brookings Institution Fellow who focuses on regional economic development. "Look at the direction, not the level," Wial admonishes. "That's as well established as any fact on jobs and the elections."
Ohio is also helped along by natural gas drilling, as is Pennsylvania. In Iowa and New Hampshire, the unemployment rate sounds like the 1990's -- 5.1 percent in Iowa, 5.0 in New Hampshire.
Even in states like North Carolina, Nevada and Florida, unemployment is trending downwards, though it's still higher than the national average. Unemployment is also dropping in Arizona and Wisconsin. In Virginia it's just 5.6 percent.
"There have been three industry sources of growth over the last year or so," Wial says. "The auto industry, information technology, and energy."
All located disproportionately, in swing states.
Thursday, April 05, 2012
Rolling Stone’s Matt Taibbi takes a look at the fragile situation at Bank of America. The bank that was deemed too big to fail and received a $45 billion government bailout has, Taibbi argues, defrauded investors and insurers, homeowners and the unemployed.
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, February 21, 2012
Has Greece been saved for good? Euro zone leaders have agreed to a second bailout to save Greece from bankruptcy but Athens has to accept deep spending cuts and permanent monitoring. This has caused many Greeks to revolt. Joining The Takeaway is Steve Evans, correspondent for our partner the BBC.
Tuesday, November 29, 2011
A federal judge rejected a $285 million settlement between Citigroup and the Securities and Exchange Commission, objecting to the practice of allowing banks to settle fraud cases without admitting guilt. Citi may now face a trial over the sale of toxic mortgages which cost investors millions but made the bank profit. The judge said the public has a right to "the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives."
Tuesday, November 29, 2011
Much of the political turmoil surrounding the euro zone crisis has centered around the question of whether fiscally stronger nations, such as Germany and France, should have to bail out Greece and other struggling economies. German Chancellor Angela Merkel has held the purse strings along with other leaders who have demanded strict austerity measures in those countries receiving assistance. Merkel is under political pressure at home with many in her government feeling that the Greeks, like the German people, should have lived within their means.
Monday, November 21, 2011
A weak economy and the failed pension plans of several bankrupt companies have increased the financial burden of the government agency that insures pensions for one in seven Americans. The Pension Benefit Guaranty Corporation (PBGC) insures private sector pension plans and takes over retirement benefit payouts when traditional pensions fail. Unfortunately, the little-known federal agency is reporting a record $26 billion deficit for the fiscal year ending in late September. The director of the agency has said that they may "eventually" need a bailout from taxpayers.
Friday, October 28, 2011
Days after the Eurozone's emergency summit meeting yielded relatively successful results the head of the Eurozone bailout fund is in China this morning asking officials to help rescue European nations. China's deputy finance minister has said that his country wants more details before investing in the Eurozone bailout fund. Joining The Takeaway from Beijing is Martin Patience, correspondent for our partner the BBC. Andrew Leung is an international and independent China specialist, and chairman of Andrew Leung International Consultants.
Wednesday, October 12, 2011
In Europe, political parties in Slovakia are figuring out their next step a day after the Parliament there dramatically rejected plans to expand the European Union bailout fund. Slovakia is the last euro zone state to vote on ratifying the expansion of the European Financial Stability Facility (EFSF). The E.U.'s plan is to expand the fund's effective lending capacity to €440 billion, roughly $600 billion, as well as empowering it to buy eurozone government debt and offer credit lines to member states and to banks. Top E.U. officials have today been urging the country to ratify the bill swiftly — and a new vote on the fund is likely by the end of this week.
Tuesday, October 04, 2011