Op-Eds Speaking Truth to the Powers-That-Be

Sorry Republicans: TARP Worked.

If you turned on a TV, or picked up a newspaper, or logged in to the Internet in 2008, it was everywhere: The Bailout.

It was evil.

It was immoral.

It was the end of days.

It worked.

Much to the dismay of the authors of the screaming headlines, and interminable talking-head shows, the Troubled Asset Relief Program (TARP), or, as it is more commonly known, the Bailout, succeeded, in spite of the catastrophic armageddon-like ramblings of commentators at the time..

Typical commentary in 2008 looked like this:

“A taxpayer bailout [of the Big Three auto makers] would be a terrible mistake. It would subsidize the shoddy management practices of the corporate bureaucrats at General Motors, Ford and Chrysler, and it would reward the intransigent union bosses who have made the synonymous with inflexible and anti-competitive work rules.” – Daniel J. Mitchell, CNN

“The AIG bailout has become the poster child for wider public outrage over the financial crisis and its impact on ordinary Americans. Mr. Barofsky said that Treasury financial statements point to expected losses to taxpayers of about $30 billion.”  – Christian Science Monitor, January 27, 2010

Original estimates were that  the U.S. taxpayers would be soaked for as much as $300 billion.[1]

The restrictions that the Obama Administration imposed, particularly in regard to executive compensation, and the hands-on pressure that the Feds applied to sloth-sluggish companies like General Motors to reinvent its corporate culture had a lot to do with the success of the program.

It was not the wrapped gift that TARP  under  the Republican George W. Bush Administration, was intended to be.

TARP stabilized the economy, and allowed businesses to rebuild their debt packages with private lenders.  More important, it kept even more millions of people from losing jobs and their homes.

The Treasury is being repaid  in full, with billions in interest. Even though most recipients of TARP have until 2017, most have repaid their loans much earlier.

On December 16, 2010, the Congressional Budget Office (CBO) estimated the total cost would be $25 billion,[2] although Treasury Secretary Timothy Geithner argued that the final cost would be still lower. [3]

The price tag will be much lower to taxpayers than the cost of the Savings & Loan bailout of the late 1980s.  That  cost 3.2% of GDP during the Reagan/Bush era. By contrast, during the Obama Administration, less than 1% of GDP will be spent to deal with the biggest melt-down in our financial history since the Great Depression.[4]

The pundits said that the government would be holding GM, AIG and Citigroup for many years.  The last to go is AIG.  AIG is buying back the Treasury’s stake and emerging from TARP over this year.  The first phase of the return of AIG to the private sector began last week.  The Treasury will release more shares in a prudent manner so as not to swamp the market and lower the value of  the shares.[5]

Of the $245 billion invested in U.S. banks and major corporations, over $182.3 billion, 74% of what was put out, has been paid back, including $18.9 billion in dividends, interest and other income, along with $4 billion in warrant proceeds.  As AIG and others near the end of their repayment plans, TARP may net a small profit to the government.

  • AFP reported on Dec 9, 2009: “Bank of America said Wednesday it had completed repayment of 45 billion dollars to the US government from a capital injection under a program to stabilize the financial system… The company also paid 190 million in dividends on the Treasury’s preferred shares.”
  • December 23,2010 CBS Marketwatch reported Citigroup repaid the larger chunk of its TARP debt: ” Citigroup Inc. said Wednesday that it repaid $20 billion it got from the Troubled Asset Relief Program last year, freeing the giant bank from government limits on compensation. Citi also ended a large loss-sharing agreement it struck with the government… To end the loss-sharing program, the government cancelled $1.8 billion of trust preferred securities that were part of the $7.1 billion Citi paid for the extra support. The government continues to hold $5.3 billion in Citi trust preferred securities.”
  • On April 21, 2010, General Motors CEO Ed Whitacre, in an Op-Ed in the Wall Street Journal announced: “Today, General Motors is announcing that it has made a payment of $5.8 billion to the U.S. Treasury and Export Development Canada. We’re paying back—in full, with interest, years ahead of schedule—loans made to help fund the new GM.”
  • MSNBC reported on December 7, 2010, a day that did not live in infamy, that Citigroup retired its debt to the federal government with a whopping $12B profit to the taxpayers:  “The government said late Monday it had reached a deal to sell its remaining holdings of Citigroup common stock and would end up turning a profit of $12 billion on its bailout of the giant bank.”
  • On May 24, 2011 the Financial Times reported in its Alphaville section: “American International Group and its largest investor, the US Treasury, are poised to raise at least $8.7bn through a sale of stock on Tuesday, handing the federal government a small profit on the deal, people familiar with the matter said.”
  • The next day, the news in the New York Times: “Chrysler paid back on Tuesday $7.6 billion in loans from the American and Canadian governments, paving the way for its Italian partner, Fiat, to increase its control over the Detroit carmaker… Chrysler was not obligated to pay back its United States loans until 2017. In a statement, President Obama said that the early repayment was further proof that government intervention in Detroit’s troubles was a prudent decision.”

The news is not all rosy. Freddie Mac and Fannie Mae, nationalized by the Bush Administration, remain a large problem for the Obama Administration to resolve. They were nationalized pre-TARP, with the intent of leaving them as a giant headache for the next Congress and President.  They are still the largest lenders, and had, ironically, higher standards that should have kept them out of trouble until the Bush Administration relaxed the whole system for bundling loans and unleashed the disaster that befall the whole system. Fannie & Freddie, in the freewheeling world of bundled mortgages, received piles of mortgage manure from other institutions that had virtually no restriction or vetting on what they packaged and sold to these mortgage giants.  Their case is still a work in progress.

The banks did not free up credit as quickly as the Treasury had hoped, but a year or so longer than some had expected, it did free up.  The only big losers in most of these crises have been shareholders and some debtors of the companies.  Many were wiped out of their positions, and a few found their bonds either worthless or turned into shares of a reorganized company.

Republicans had been hoping to capitalize on TARP as a political issue going into 2012.  The government gave many of these companies until 2017 to pay back their loans. With most paying off their loans in the first three years, though, it seems clear that TARP is a non-starter for the GOP in their presidential race.

Not only will the taxpayers see their money back, with a profit, but the Administration was also able to wrangle concessions out of Chrysler’s owner, Fiat, to speed up construction of fuel-efficient cars right here in the United States.

We in the media are great at reporting the worst fears, and the most dire of numbers, but wouldn’t it be nice, once in a while, when we see the proof that the hours of programming and the thousands of pages of doom and gloom happily turned out not to be the truth, that we set the record straight. Let this be the first, hopefully, of many attempts to do so.

My shiny two.

About Brian Ross

Brian Ross is a writer, screenwriter, political satirist, documentarian and short filmmaker who blogs for Truth2Power, the Huffington Post, and the Daily KOS, among others.

One comment on “Sorry Republicans: TARP Worked.

  1. Pingback: Sorry Republicans: TARP Worked. « Truth2Power | Friends Against Political Extremism

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

The Past on T2P

Stay Connected.

Catch up. Catch on! Text T2Power to 22828!

Enter your email address to follow this blog and receive notifications of new posts by email.

Top Posts & Pages

Get Forward Thinking

Sign up here for Forward Thinking, a monthly newsletter delivered to your email box with special features from the various RossGroupFT publications, including new titles from RossBooksFT.
For Email Marketing you can trust

Copyright Notice

The (T2P) website and all text, design and artwork elements not part of the standard WordPress template or an article, and all T2P logos and trademarks are copyright ©2011 and future years by TheRossGroupFT, LLC. All rights reserved. All articles' text is the copyright of its author. T2P is a forum for free speech of its invited authors, and the opinions and information that they present are their own. TheRossGroupFT, its principals, agents and assigns are not responsible for the opinions or content of any article.
TheRossGroupFT - Forward Thinking for New Media

Writing for T2P

We're looking for passionate, out-of-the-box, outside-the-Beltway writing and thinking. To find out more about how to audition your work for us, click here.

Follow t2PTweets on Twitter!

About Truth-2-Power

A phrase coined by the Quakers during in the mid-1950's, "Speak truth to power," was a call for the United States to stand firm against fascism and other forms of totalitarianism; it is a phrase that seems to unnerve political right, with reason. The Founding Fathers of United States risked their lives in order to speak truth to the power of King George and the mighty British Empire. It was and is considered courageous. Join us!

LIKE us on Facebook!

The Forward Thinking Store

Get your t2p gear at the Forward-Thinking Store

Share us on LinkedIN

%d bloggers like this: