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Joo Rip Gwa Rhhee
Joined: 25 May 2003
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 Posted: Mon Aug 31, 2009 7:29 am Post subject: As banks repay bailout cash, U.S. sees a profit |
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http://www.msnbc.msn.com/id/32623489/ns/business-the_new_york_times/
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Nearly a year after the federal rescue of the nation�s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.
The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Mon Aug 31, 2009 7:41 am Post subject: Re: As banks repay bailout cash, U.S. sees a profit |
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| Joo Rip Gwa Rhhee wrote: |
http://www.msnbc.msn.com/id/32623489/ns/business-the_new_york_times/
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Nearly a year after the federal rescue of the nation�s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.
The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times. |
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So they were only given $13 trillion, and still managed to eke out a profit?
Damn financial genii! |
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visitorq
Joined: 11 Jan 2008
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| Posted: Mon Aug 31, 2009 9:55 am Post subject: |
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| msnbc is so full of crap, they'd be better off printing WWN bat-boy stories than this garbage (more believable)... |
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Hater Depot
Joined: 29 Mar 2005
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Kuros
Joined: 27 Apr 2004
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| Posted: Mon Aug 31, 2009 4:47 pm Post subject: |
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Finance experts say the government overpaid for the bank assets it bought
�Taxpayers should heave a sigh of relief that the investment in the banks protected them from even more catastrophic losses from more bank failures,� said Aswath Damodaran, a finance professor at the Stern School of Business at New York University.
But all the profits taxpayers have won could still be wiped out by two deeply troubled institutions. Both Citigroup and Bank of America are still holding mortgages and other loans that were once worth billions of dollars but whose revised values are uncertain. If they prove �toxic� because they cannot attract buyers, they could leave large holes in the banks� balance sheets. |
I'd also like to point out that there are still billions upon billions worth of toxic assets in the system. Which was one of the complaints on this board: TARP is far from a long-term solution. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 01, 2009 4:45 am Post subject: |
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Paulson committed perjury:
http://market-ticker.denninger.net/archives/1392-Congress-Where-Are-The-Subpoenas.html
Ok. About the OP.
Rolfe Winkler:
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| As big banks repay bailout money, U.S. sees profit (NYT) Eegads! I�m linking to this as an example of really unfortunate financial reporting. The U.S. is making a profit on the bank bailout because of a few deals for TARP warrants? Really? Take Goldman. Yeah, our return on the TARP portion of the bailout was positive, but that doesn�t mean the government �made money.� What about the $13 billion the Fed spent to make good on Goldman�s insurance policies with AIG? What about all of the debt FDIC has guaranteed for Goldman? On a risk-adjusted basis, we�re way in the hole. The long-term costs/consequences of explicit government guarantees against failure �which is what these banks now have � is many, many times larger than any profits earned on TARP warrants. |
http://blogs.reuters.com/rolfe-winkler/2009/08/31/links-8-31/
Barry Ritholtz
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Bailout Profits? Don�t Make Me Laugh!
My definition of an investment profit is simple: You take the money you have invested, and if adds up to more that what you began with, well, then, you have a profit.
Let�s say on the other hand, you own 20+30 positions; 5 of them are higher than where you purchased them, and all the rest deeply in the red. Net net, your portfolio is down immensely. Most rational investors would hardly call that investment a �profit.�
Looking just at early TARP repayments means that we are ignoring a) the rest of the TARP; and b) the majority of other expenses, guarantees, loans capital injections, and outright spending that has taken place.
Perhaps the rookies are manning the terminals, with the senior people away on vacation. That would explain the inexplicably clueless headline over at the NYT this morning: As Big Banks Repay Bailout Money, U.S. Sees a Profit.
Excerpt:
�Nearly a year after the federal rescue of the nation�s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.
The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.�
Now, by any traditional measure of profits, you include all of the costs incurred against the total revenue, to determine if there is a net gain (or loss). This simple mathematical analysis of what a profit is � Are we up or down? � seems to have eluded the headline writers.
At least the author makes mention of how tenuous the usage of that word is the article�s body:
�These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies.
The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.�
What this is more appropriately described as is a return of capital; to call this a profit is to ignore trillions of dollars in taxpayer monies that have been spent, lent, guaranteed, drawn against and otherwise consumed in what will likely be the greatest transfer of wealth in the planet�s history. |
http://www.ritholtz.com/blog/2009/08/bailout-profits-dont-make-me-laugh/
Yves Smith:
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More Bogus Bailout Reporting: �As Big Banks Repay Bailout Money, U.S. Sees a Profit�
Clearly, the spin is in. As a post earlier today discusses, the Financial Times is running a story that claims that the Fed made money on its rescue programs, then slips in all the tidbits in the body of the article to let discerning readers know that the reporter understands that the analysis is utter rubbish while looking like it is not crossing the Fed.
In a simply remarkable coincidence of timing, the New York Time running a story with the very same message, namely that bailouts are good for taxpayers because the Treasury has made money on the TARP.
If you believe that, I have a bridge in Brooklyn I�d like to sell you. The fact that we have such patent garbage running as a front page New York Times story says either the reporter and his editors lack the ability to think critically (or find sources who could do that for them) or that we have a controlled press. Given that subscriber-driven Bloomberg has even fallen in line, I am inclined to the latter view, but I am still curious as to how this has been achieved. Is this the price of access journalism, or is something more pernicious at work?
Now to the intellectually bankrupt New York Times story. Here is how it determined the TARP was making money:
The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.
Help me. Credit 101 is that your best borrowers repay first (unless you gave them overly generous terms, of course, then they might hang on to the proceeds). A quick but not conclusive search suggests that only a small portion of the TARP has been retired, so it is wildly premature to declare victory.
In fact, another source looked at the TARP as of June and estimated that it had lost $148 billion, and had lowered loss total as a result of the repayments. Now bank stocks have rallied since then, but the biggest contributors to the red ink, namely AIG and Citigroup, are not in any better shape fundamentally than they were then. Indeed, the fact that new AIG CEO Robert Benmosche has in a remarkable show of hubris, effectively told the US taxpayer to stuff it, AIG has the dough and is in no particular hurry to return it, nor does it care what the public or Treasury wants, its demands are unreasonable. I wouldn�t hold my breath about having the loans repaid.
Moreover, the piece contains a huge canard:
But the real profit came as banks were permitted to buy back the so-called warrants, whose low fixed price provided a windfall for the government as the shares of the companies soared
Roger Ehrenberg already dispatched this goofy idea with admirable zeal:
The US taxpayer has been systematically looted out of hundreds of billions of dollars�.Goldman Sachs is posting record earnings and will invariably be preparing to pay record bonuses, not nine months after the firm was in mortal danger? Whether anyone will admit it or not, without the AIG (read: Wall Street and European bank) bail-out and the FDIC issuance guarantees, neither Goldman nor any other bulge bracket firm lacking stable base of core deposits would be alive and breathing today.
Goldman is a great firm with a stellar culture, and in most circumstances it�s risk management and funding practices have been second to none. Except when the crisis hit. It stood with the rest of Wall Street as a firm with longer-dated, less liquid assets funded with extremely short-dated liabilities�.In exchange for giving the firm life (TARP, FDIC guarantees, synthetic bail-out via AIG, etc.), the US Treasury (and the US taxpayer by extension) got some warrants on $10 billion of TARP capital injected into the firm�.. Lloyd Blankfein smartly paid the full $1.1 billion requested. He looked like a hero for doing so, a true US patriot repaying the US Government in full for its lifeline, thanking the US taxpayer in the process. $1.1 billion� $1.1 billion�Hmm�something doesn�t seem right. You know why it doesn�t seem right? BECAUSE THE US TREASURY MIS-PRICED THE FREAKING OPTION.
There is not a Wall Street derivatives trader on the planet that would have done the US Government deal on an arms-length basis. Nothing remotely close. Goldman�s equity could have done a digital, dis-continuous move towards zero if it couldn�t finance its balance sheet overnight. Remember Bear Stearns? Lehman Brothers? These things happened. Goldman, though clearly a stronger institution, was facing a crisis of confidence that pervaded the market. Lenders weren�t discriminating back in November 2008. If you didn�t have term credit, you certainly weren�t getting any new lines or getting any rolls, either. So what is the cost of an option to insure a $1 trillion balance sheet and hundreds of billions in off-balance sheet liabilities teetering on the brink? Let�s just say that it is a tad north of $1.1 billion in premium. And the $10 billion TARP figure? It�s a joke. Take into account the AIG payments, the FDIC guarantees and the value of the markets knowing that the US Government won�t let you go down under any circumstances. $1.1 billion in option premium? How about 20x that, perhaps more. But no, this is not the way it went down�.
But no, if you subscribe to the world according to the New York Times, you�d think we the long suffering taxpayer got a really good deal. By extension, we should be really happy if financial firms throw themselves off the cliff again en masse, since that will give us all the opportunity to make even more money by rescuing them! |
http://www.nakedcapitalism.com/2009/08/more-bogus-bailout-reporting-as-big-banks-repay-bailout-money-us-sees-a-profit.html
Ok. This is spin. And there is a good reason that this is coming out now. There are more bank bailouts on the way, and they will be massive. After all this, nothing has changed. The "toxic assets" are still simmering as level 3 assets, the big banks are bigger, res. RE prices are still dropping and commercial real estate is a gathering storm. Again. Gotta butter up the population before you give more of their future wealth to bottles and models banksters. |
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bacasper
Joined: 26 Mar 2007
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| Posted: Tue Sep 01, 2009 8:04 am Post subject: |
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| Hater Depot wrote: |
| bacaspar, I've pointed to you before that the bailouts did not come close to $13 trillion. And TARP was $700 billion. |
Why do I keep coming across this $13 trillion figure?
Anyway, so they were only given $700 billion, and still managed to eke out a profit?
There, I fixed it. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 01, 2009 8:30 am Post subject: |
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| bacasper wrote: |
| Hater Depot wrote: |
| bacaspar, I've pointed to you before that the bailouts did not come close to $13 trillion. And TARP was $700 billion. |
Why do I keep coming across this $13 trillion figure?
Anyway, so they were only given $700 billion, and still managed to eke out a profit?
There, I fixed it. |
Bloomberg reports that the total amount of various government supports totals around 13trillion. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Sep 01, 2009 8:46 am Post subject: |
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And Taibbi:
http://trueslant.com/matttaibbi/2009/09/01/bailout-propaganda-begins/
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It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we�re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.
This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme � more on that in a moment � the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven�t retired their obligations yet, it�s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.
The other reason for that is that it�s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities � the TALF, the PPIP, the Maiden Lanes, and so on. The losses from the Fed�s purchase of distressed/crap Bear Stearns assets (Maiden Lane I) and AIG assets (MaidenLanes II and III) alone were as recently as late July calculated in the $8.6 billion range, and even that number is very conservative. Then there�s the trillion or so dollars that the Fed used on buying up mortgage-backed securities and Treasuries; we don�t know what their market value is now. And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg�s FOIA request for those records actually goes through. |
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