Net result of financial bailout? $40 to $100 Billion profiit to taxpayers

[shira]

This is just like GM paying back all its government debt when it didn't really do that. They didn't count Fanny and Freddie did they?

Another idiot who can't read:

The costs

• The biggest expense by far comes from the rescue of mortgage finance giants Fannie Mae and Freddie Mac. Or, actually, the rescue of their debtholders — stockholders have been essentially wiped out.

The $130 billion cost is the money the government has put into Fannie and Freddie ($154 billion) to cover their losses, less the dividends ($24 billion) Fannie and Freddie have paid on the government’s preferred stock. The Treasury and the nonpartisan Congressional Budget Office both expect that $130 billion figure to shrink; Fannie and Freddie have been adding profitable business since 2008, which should begin to outweigh their losses from the housing bubble. But we’re being conservative and counting the full $130 billion.

 

[Darwin333]

You really do have a problem with math.

You think that counting Fed income from treasuries is hilarious, but you think counting the interest paid by Treasury to the Fed on those notes is a valid part of the deficit.

You have a choice: Either you count both or you ignore both. In either case, the deficit is smaller by the amount of interest paid/earned.

It is a net freaking wash you dimbwit. Just like if I loan money to myself and pay myself interest I have neither created new liabilities nor new income.

When did I ever say that the interest paid to the Fed was part of the deficit? The Fed by law must return all profits, minus operating costs, to the Treasury.

You're also conveniently ignoring that the Fed holds about a $trillion in mortgage-backed securities, which earn interest at a higher rate than treasuries.

Didn't ignore that at all, simply stated that last year we paid ourselves $80B in interest payments. Subtract $80B from your numbers and how good does it look?

Just to prove my point a bit more, if the Fed created $20T out of thin air and then purchased Treasuries with that money (while keeping the actual money it created in its own vault so it doesn't actually get into the system and create inflation) would the money the Fed makes off the interest (and gives to the Treasury) reduce the deficit?

 

[IHateMyJob2004]

HAHAHAH,

Warren Buffett was right!

 

[HendrixFan]

The bottom line

Our accounting is unconventional because in some places we count what has happened, in some places we project what’s likely to happen, and in some places we’ve done our own numbers because no others exist. If things break right, taxpayers could come out $100 billion ahead: our $42 billion profit estimate, plus a $25 billion reduction in the Fannie/Freddie cost, $25 billion more in Fed profits, and a reduction in the $19 billion expense we’re showing for TARP.

I think we can all agree that "if" things go a certain way we "could" come out ahead.

 

[fskimospy]

LMAO! First time I have been accused of listening to Rush. Psst, I think he is tool too.

You might not have listened to him directly, but he was one of the primary people pushing this faulty line of thinking.

Not once have I ever read anything by anyone credible that even a small point was to prop up food prices.

The purpose was to prop up all prices, food included. That's what injecting large amounts of capital into a system does.

So you are saying that in a global recession that the demand for EVERY commodity has increased to the point of often more than a doubling in the price? The decline in the value of the dollar that those commodities are priced in doesn't have anything to do with it now? Give me a break. We aren't talking just food and energy but ALL commodities.

And I do find it rather funny that you argue we shouldn't use the stuff people MUST purchase every day in order to survive in the calculations but we should use stuff that aren't required.

It's not all commodities. We don't use those two for very good, well established reasons.

I am not a conservative but of course that doesn't fit into your nice cookie cutter argument does it.

As far as bond prices, I am not sure what your point is, as you arguing that they will not raise off their historic lows and will instead remain their for a decade or two?

I don't care if you're a conservative or not, all I'm saying is that on this issue you are wrong, and using a wrong conservative argument. My point is that bond prices are yet another aspect of the wrong conservative argument about the consequences of our fiscal and monetary policies over the last few years. Both have proven to be false, yet both continue to be pushed.

 

[Jhhnn]

I think we can all agree that "if" things go a certain way we "could" come out ahead.

I think that's correct, and I think that Fortune is unlikely to puff the numbers. It all hinges on the ability of the FRB to make money out of nothing, which happens all the time, anyway. It's how we manage to maintain liquidity in the face of extractive practices at the top of the foodchain & balance of payments deficits of ~$500B/yr- new money is created.

The bailout reinforced certain moral hazards, unfortunately, rewarded very, very bad behavior, but no other acceptable mechanism existed to prevent collapse, still doesn't. Republicans have seen to that.

Deregulated financial institutions engaged in the free market global economy, remember? They're being good boys, for now, but it's kinda like letting unsupervised toddlers play with dynamite & matches, in the house...

They'll go too far, again, if we let 'em. It's their nature. Constraints of the New Deal acted as an effective playpen for decades, but Republicans insisted on taking it down, and now insist on keeping it down, too.

So I'd encourage all the anti-gay, anti-tax, pro-life, pro-gun, pro God, pro military culture warriors out there to take a look at the total package, recognize that under all those fancy trappings lurks a really nasty slut who'll rob you blind the first chance she gets... right after she shows you a really good time, of course...

 

[ProfJohn]

But the right insists that the bailout was a disaster. In fact, they pretend the bailout was the problem rather than the solution.

I do believe that much of the left feels the same way.

In light of this startling result, maybe the right-wing posters on this website can again explain to us why they think the Obama Presidency is a disaster. Explain to us how staving off a second Great Depression and giving the American taxpayer up to an additional $100 billion profit was a disastrous policy.

1. Obama had nothing or little to do with all of this and a President McCain would have produced the same results.

Oh, that's right: It would have been much better if the government had done nothing and allowed the U.S. financial system to collapse.

I don't really recall many people making that argument. Perhaps we should find some threads from that time and link them to see who was for or against the bailouts.

Also, the article makes NO mention of the stimulus OR the auto bailouts. This looks to just be the financial bailouts that took place at the end of the Bush term and beginning of Obama term. I am not sure how you can read the article and give Obama credit for saving us.

The economy was falling off a cliff and Bush+Obama grabbed a parachute and ensured a soft landing. We can give them both credit for doing the right thing at the moment we were in the greatest danger. But we can also blame Bush for driving off the edge in the first place and Obama for failing to get us out of the ravine.

 

[Darwin333]

You might not have listened to him directly, but he was one of the primary people pushing this faulty line of thinking.

I don't know what he was pushing but I damn sure wouldn't buy anything he said concerning fiscal/monetary issues without confirming it myself. He is a tool and I frankly couldn't give two shits about anything he said.

The purpose was to prop up all prices, food included. That's what injecting large amounts of capital into a system does.

Specifically which "capital injections" are you referring to? The only price I can think of that they where trying to prop up is housing, they have and continue to fail. So we got higher priced everything else while the main purpose of the policy failed, is that your argument?

It's not all commodities. We don't use those two for very good, well established reasons.

Which ones didn't?

As far as what numbers the .gov uses, I don't nor will I give a shit about that either. They need the CPI to remain low due to our entitlements and IIRC a lot of .gov salaries are indexed to inflation. A higher CPI equals a larger deficit, please forgive me for using what people have to actually spend in order to live.

I don't care if you're a conservative or not, all I'm saying is that on this issue you are wrong, and using a wrong conservative argument. My point is that bond prices are yet another aspect of the wrong conservative argument about the consequences of our fiscal and monetary policies over the last few years. Both have proven to be false, yet both continue to be pushed.

I didn't realize the conservatives were even talking about bond prices but if you say so, again I really don't give a shit. It is rather ironic that they are so pissy about basically the continuation of Bush's fiscal and monetary policy though.

You do realize that current bond prices have little to do with our current fiscal policies, right? And the last few bond auctions aren't exactly what I would call "good". Then you have the entire QE thing, world economy (especially Europe), etc..

Finally, I find it rather ironic that you are talking about policy thats intent is to cause inflation while banging your chest that the other side was wrong about bond prices going up. Please, enlighten me as to why current bond prices are where they are and what you expect them to do in the near term.

 

[fskimospy]

Specifically which "capital injections" are you referring to? The only price I can think of that they where trying to prop up is housing, they have and continue to fail. So we got higher priced everything else while the main purpose of the policy failed, is that your argument?

Housing prices have largely stabilized after being in free-fall. I can't possibly see how that's a failure.

Which ones didn't?

As far as what numbers the .gov uses, I don't nor will I give a shit about that either. They need the CPI to remain low due to our entitlements and IIRC a lot of .gov salaries are indexed to inflation. A higher CPI equals a larger deficit, please forgive me for using what people have to actually spend in order to live.

Rice, for one. A global food staple that wasn't supply constrained. It showed basically no change over time since implementation of these policies despite all this supposed US caused commodity inflation. (there was a spike in March of 2008, but that is clearly before these policies went into effect)

http://www.indexmundi.com/commodities/?commodity=rice&months=60

Can you explain why the world's second largest food crop would remain immune from this inflation if it were caused by some systemic action?

I didn't realize the conservatives were even talking about bond prices but if you say so, again I really don't give a shit. It is rather ironic that they are so pissy about basically the continuation of Bush's fiscal and monetary policy though.

You do realize that current bond prices have little to do with our current fiscal policies, right? And the last few bond auctions aren't exactly what I would call "good". Then you have the entire QE thing, world economy (especially Europe), etc..

Finally, I find it rather ironic that you are talking about policy thats intent is to cause inflation while banging your chest that the other side was wrong about bond prices going up. Please, enlighten me as to why current bond prices are where they are and what you expect them to do in the near term.

Who cares who made the policies? The last few bond auctions were just fine, rates remain extraordinarily low. QE has ended, and bond prices remain extremely low. I imagine that bond prices will remain as they are for the foreseeable future until we escape the liquidity trap that we're in. Paul Krugman has basically hit every major aspect of this economic crisis on the nose, and so I'm pretty okay with trusting his judgement.

 

[Jhhnn]

But we can also blame Bush for driving off the edge in the first place and Obama for failing to get us out of the ravine.

As if each action has the same level of difficulty...

 

[Fear No Evil]

As if each action has the same level of difficulty...

Its the job is too tough I'm sure there are plenty of people who will take over for Obama. The guy talked a lot of shit during his campaign.. he's basically done nothing he's promised. Is he incompetent or just stupid? Either way I am not sure he's qualified to be President. If being able to talk well from a teleprompter solved the world's problems we'd be golden, unfortunately the real world doesn't work that way.

 

[HendrixFan]

As if each action has the same level of difficulty...

Obama shouldn't have acted like it would be. He sold everyone on a simple hope and change package. If we believe in a new tomorrow we would have it.

Then once he was elected but before he took office he started saying change will require alot of effort. Change wasn't easy.

He sold his voters one thing and delivered another. I understand he is in a bind, and whoever took office after one of the worst presidents ever would have had a tough time. But he compounded the problem by essentially writing checks he couldn't cash.

 

[woolfe9999]

I do believe that much of the left feels the same way.

1. Obama had nothing or little to do with all of this and a President McCain would have produced the same results.

The first half of that sentence is wrong; the second half is probably correct, though we'll never know. That fact is, it took some political courage to continue the TARP program that Bush started because it was politically unpopular then (and remains unpopular). Bush, OTOH, could do what was necessary in spite of the political consequences because his political career was already over.

But we can also blame Bush for driving off the edge in the first place and Obama for failing to get us out of the ravine.

Both of these statements are essentially wrong. POTUSES have far less to do with the status of the economy than is commonly believed. Jnnn's comment is also correct: it is much easier to get us into a mess like this than to get us out of it.

 

[ProfJohn]

Both of these statements are essentially wrong. POTUSES have far less to do with the status of the economy than is commonly believed. Jnnn's comment is also correct: it is much easier to get us into a mess like this than to get us out of it.

I agree with you completely.

However, look at every other recovery since WW 2 and you will see that this one has the worst recovery. Remember that traditionally big drops are followed by big gains. The worst post WW 2 recession was Reagan's in 82 and the fastest recovery was also Reagan's. We hit 8% growth in 1983/84. Right now we can barely hit 2%.

The problem with Obama is that we aren't making progress 2 and a half years into his term. This keeps up and he is doomed. If unemployment is above 9% next year he will suffer the biggest defeat since Mondale, won't even be close. Even Palin could probably beat him at that point.

 

[HendrixFan]

The problem with Obama is that we aren't making progress 2 and a half years into his term. This keeps up and he is doomed. If unemployment is above 9% next year he will suffer the biggest defeat since Mondale, won't even be close. Even Palin could probably beat him at that point.

This was no normal recession, there were literally trillions of dollars being sucked out of the economy. There was no solid foundation to rebuild things on.

I do agree that Obama has not done a good job, but to compare this recession to anything "since WW 2" is silly.

 

[woolfe9999]

I agree with you completely.

However, look at every other recovery since WW 2 and you will see that this one has the worst recovery. Remember that traditionally big drops are followed by big gains. The worst post WW 2 recession was Reagan's in 82 and the fastest recovery was also Reagan's. We hit 8% growth in 1983/84. Right now we can barely hit 2%.

The problem with Obama is that we aren't making progress 2 and a half years into his term. This keeps up and he is doomed. If unemployment is above 9% next year he will suffer the biggest defeat since Mondale, won't even be close. Even Palin could probably beat him at that point.

You may or may not be correct about the political consequences of the slow receovery. Voters often do view it that. But there are numerous differences between this recession and the Reagan recession. The fundamentals of our economy were not sound prior to this recession. Our prosperity has been borrowed - illusory - for some time now. When your commerce is based largely on credit, and credit dries up, it's a lot tougher to bring it back than any other kind of economic downturn. That's why the TARP was necessary. We were facing cataclysm, literally economic armageddon, because the financial services industry has its tendrils in every aspect of our economy. The TARP, stimulus and auto bailout were necessary evils to stave off another Great Depression or worse. The way voters view it is relevant for election outcomes but often has little to do with the truth of the matter. It's why we often elect the wrong people.

 

[werepossum]

A newly-completed Fortune analysis concludes that the net result of the financial bailout will be a profit of at least $40 billion - and as much as $100 billion - to taxpayers. This on top of the fact that the bailout staved off a financial meltdown of the U.S. and world economies.

But the right insists that the bailout was a disaster. In fact, they pretend the bailout was the problem rather than the solution.

The analysis authors put it best. The detailed numerical analysis is in the article - you can read it if you're interested. I'm including below the most salient points.

http://www.washingtonpost.com/busin...-but-it-paid/2011/07/05/gIQAbmIZ3H_story.html



In light of this startling result, maybe the right-wing posters on this website can again explain to us why they think the Obama Presidency is a disaster. Explain to us how staving off a second Great Depression and giving the American taxpayer up to an additional $100 billion profit was a disastrous policy.

Oh, that's right: It would have been much better if the government had done nothing and allowed the U.S. financial system to collapse.

Um, TARP was done under Bush, in October 2008. Do try to keep up.

http://en.wikipedia.org/wiki/Troubled_Assets_Relief_Program
http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

 

[Engineer]

I agree with you completely.

However, look at every other recovery since WW 2 and you will see that this one has the worst recovery. Remember that traditionally big drops are followed by big gains. The worst post WW 2 recession was Reagan's in 82 and the fastest recovery was also Reagan's. We hit 8% growth in 1983/84. Right now we can barely hit 2%.

The problem with Obama is that we aren't making progress 2 and a half years into his term. This keeps up and he is doomed. If unemployment is above 9% next year he will suffer the biggest defeat since Mondale, won't even be close. Even Palin could probably beat him at that point.

I wouldn't mind seeing Obama lose (don't care much one way or another). I'm more curious as to see what the next man/woman in line (Congress too) can do to fix our "off shored" economy (I know you don't believe that but that's my view and it's picking up steam).

 

[werepossum]

I wouldn't mind seeing Obama lose (don't care much one way or another). I'm more curious as to see what the next man/woman in line (Congress too) can do to fix our "off shored" economy (I know you don't believe that but that's my view and it's picking up steam).

As far as I can tell, neither party has a clue as to how to accomplish that. Nor do I, although I can (and did) easily foretell the effects from our behavior. My best guess would be to re-enact import tariffs, change tax laws to not reward moving production off-shore, and change tax laws to allow money from foreign endeavors to be brought in tax free if at least half is invested in new domestic infrastructure or payroll. But as to whether that would leave us better off or even worse off, who knows? Any kind of protectionism causes retaliation.

One thing is for sure, we have totally squandered the power of being the world's biggest and most profitable market.

 

[ProfJohn]

This was no normal recession, there were literally trillions of dollars being sucked out of the economy. There was no solid foundation to rebuild things on.

Go back and look at the economy of the 1970s and explain to me how we rebuilt from that.

1970s unemployment by year
4.9% 5.9% 5.6% 4.8% 5.6% 8.4% 7.7% 7.0% 6.0% 5.8%

As you can see the numbers in the 70s were a nightmare. Four years with unemployment over 6%, over double the number we have had in the past TWO decades. There were no jobs to be found for much of the decade. The steel industry collapsed as did automotive. There is a reason it is called the 'rust best.' And yet some how we rebounded out of that 82 recession FAR better than this one.

What kind of magical powers did Reagan possess to get us out of that recession?
How did Reagan go from 9.6% in 83 to 7.1% in 85, just two years later?

 

[Jhhnn]

I agree with you completely.

However, look at every other recovery since WW 2 and you will see that this one has the worst recovery. Remember that traditionally big drops are followed by big gains. The worst post WW 2 recession was Reagan's in 82 and the fastest recovery was also Reagan's. We hit 8% growth in 1983/84. Right now we can barely hit 2%.

The problem with Obama is that we aren't making progress 2 and a half years into his term. This keeps up and he is doomed. If unemployment is above 9% next year he will suffer the biggest defeat since Mondale, won't even be close. Even Palin could probably beat him at that point.

Prior to the great recession, the so-called recovery of the bush years was the weakest on record, and they weren't shy about allowing & encouraging debt acquisition at every level. It was a recovery only in the sense that debt made it possible. In reality, it was false prosperity, created for political advantage & the benefit of the financial elite. The debt overhang from that is enormous, almost beyond imagination. Dubya didn't have to start nearly as deep in the hole- he had the luxury of being able to just dig it deeper, sell it as "growth".

I'll agree that Obama hasn't really tried to impress people with the severity of our current situation, apparently believing that confidence is a strong factor in recovery. He's making huge mistakes wrt acceding to Repub demands wrt taxes & spending cuts, however, both economically & politically. He could have learned a lot from FDR.

As it is, Repubs will claim it's all Obama's fault, even though he's doing what they want...

 

[fskimospy]

Go back and look at the economy of the 1970s and explain to me how we rebuilt from that.

1970s unemployment by year
4.9% 5.9% 5.6% 4.8% 5.6% 8.4% 7.7% 7.0% 6.0% 5.8%

As you can see the numbers in the 70s were a nightmare. Four years with unemployment over 6%, over double the number we have had in the past TWO decades. There were no jobs to be found for much of the decade. The steel industry collapsed as did automotive. There is a reason it is called the 'rust best.' And yet some how we rebounded out of that 82 recession FAR better than this one.

What kind of magical powers did Reagan possess to get us out of that recession?
How did Reagan go from 9.6% in 83 to 7.1% in 85, just two years later?

None. The recession was vastly milder. It was in significant part due to sky high interests rates set by the central bank, a policy that was far easier to reverse. This recession was a near Great Depression and an almost total collapse of the worldwide finance industry.

Attempting to compare the two is absurd. In case you didn't notice, with the last Great Depression it took the countries of the world the better part of a decade to dig out from.

 

[JS80]

So you loliberals are saying Bush was a genius?

 

[spidey07]

So you loliberals are saying Bush was a genius?

That is what I'm seeing. Theyre saying bush was right.

 

[fskimospy]

So you loliberals are saying Bush was a genius?

Remember when you said that even though you thought some policy of Bush's was bad that you would have found a way to defend it? Well actual adults can recognize policies which were good like TARP while still being able to understand that the guy's performance overall was terrible.

Of course you can't even balance your checkbook, so this might be a little advanced for you.

EDIT: Hahaha, Spidey agrees with you. That's how you know you've just said something dumb.