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Entries in TARP (9)

Friday
Aug242012

AIG Bailout Leads to $17.7 Billion Government Profit After TARP

STAN HONDA/AFP/Getty Images(NEW YORK) -- The federal government has sold off the remainder of its AIG securities for a surprise $17.7 billion profit, the latest piece of the controversial TARP government bailout to make a profit.

The AIG profit, announced by the Federal Reserve Bank of New York on Thursday, came as the Republicans have made the expensive federal bailout a campaign issue.

The black ink surrounding the American International Group was a surprise because analysts had initially thought that much of the government's AIG investment would never be recovered.

The New York Fed said it has sold the remainder of the AIG securities for a net profit of $17.7 billion, including $8.2 billion in interest and fees.

"We've made significant progress winding down TARP's investment programs and recovering taxpayer dollars," said Treasury spokesman Matt Anderson.

The government initiated a multi-stage rescue of AIG through both the Federal Reserve and Treasury, which committed $112 billion and $720 billion to total TARP funds, respectively.

The Treasury still has $24.2 billion left in its principal investment in AIG that is outstanding. That is backed by 871 million shares of common stock, worth around $30 billion depending on market conditions.

Despite the good news about AIG, the Treasury still estimates the total loss from TARP is $63.5 billion, most of which is committed to housing programs.

In comparison, the government has taken a hit so far with its auto rescue and the Treasury said it expects a $25 billion loss when it completes its exit from the car companies.

TARP invested $80 billion in General Motors, Chrysler and GMAC, now known as Ally. To date, the government has recovered about half, or $41 billion, from the auto companies. The Obama administration also estimates that it saved one million jobs in 2009 by saving the auto companies from collapse.

The government is still winding down other programs as part of TARP, including its investment in about 700 banks of all sizes. To date, the Treasury has made a profit of $21 billion from its investment of $245 billion.

The Treasury also estimates a profit of $3 to $4 billion in its credit market programs.

There's at least one other area of TARP from which the government never expects to recover funds, the $46 billion foreclosure prevention programs that offered aid to homeowners.

Copyright 2012 ABC News Radio

Thursday
Aug182011

AIG Continues to Pay Down TARP Debt

Adam Gault/Thinkstock(WASHINGTON) -- The U.S. Treasury Department Thursday announced that American International Group (AIG) has taken another step to reduce its debt to American taxpayers.  AIG on Thursday submitted a $2.15 billion payment to the Treasury towards a debt that once totaled $180 billion during the country's financial crisis.  Today, AIG's outstanding balance totals $51 billion.

Assistant Secretary for Financial Stability Tim Massad called AIG's payment an "important milestone in [the company's] remarkable turnaround."  

"We continue to make progress in recovering the taxpayers' investment in AIG," Massad added.

Proceeds from AIG's sale of its Nan Shan life insurance subsidiary funded the payment to the Treasury.

To date, the Treasury Department says it has received more than 76 percent of the $412 billion disbursed through the government's TARP program.  Those payments total $313 billion.

Copyright 2011 ABC News Radio

Thursday
Mar312011

Treasury Officials Tout 'Success' of TARP, for the First Time Making a Profit

Jupiterimages/Thinkstock(WASHINGTON) -- The much-maligned TARP program moved into the black on Wednesday. On Thursday, Treasury officials touted the success of the program, for the first time making profit.
 
“We made the investments to prevent the collapse of the system,” Tim Massad, acting assistant secretary for Financial Stability, said while meeting with White House reporters in a pen-and-pad off-camera briefing Thursday. “The fact that the investments in the banks will yield a profit is a terrific benefit to shareholders.”

A total of $245 billion total was invested in the bank support program. The new repayments this week have brought the total to $251 billion returned to Treasury this week (plus some income).

“That means every further repayment we get increased the net gain to the taxpayer from the bank piece of the program,” Massad said.

And there’s still some money to get back -- still outstanding is $23 billion “face amount” of investments, mostly in smaller banks. The administration estimates overall profits on the bank program to be $20 billion, as they will continue to collect repayments.

The message to Americans? It was terrible but it won’t happen again.

“It’s terrible we had to do this,” Massad said, “it's never fair to have to use taxpayer dollars to rescue any institution. And that is why we have now reformed out regulatory system with the passage of Dodd-Frank. That gives us the tools to avoid ever having to do this again.”

Asked about former SIGTARP Neil Barofsky saying that TARP was actually a failure because it neglected to accomplish its original goal of helping homeowners on Main Street, Massad said they have more work to do.

“The message is we’re still committed to helping as many people as possible. We still have almost two years under which we can provide assistance under the HAMP program. And everyday we’re trying to help as many people as we can.”

Copyright 2011 ABC News Radio 

Wednesday
Mar302011

Back in Black: TARP Bank Programs Turn Profit

Adam Gault/Thinkstock(WASHINGTON) -- With a $7.4 billion repayment from three banks Wednesday, the TARP bank support programs launched two and a half years ago have turned a profit, according to the Treasury Department.
 
Taxpayers saw the government pump $245 billion of their money into the Capital Purchase Program, Targeted Investment Program, Community Development Capital Initiative and Asset Guarantee Program in a historic effort to stave off the financial collapse of hundreds of the nation’s largest financial institutions.
 
With Wednesday’s repayments -- and the proceeds of interest and dividend payments the banks were obligated to pay the Treasury while they participated in the programs -- the taxpayer has made a profit of about $6 billion with a total of $251 billion in total recoveries.
 
The folks at Treasury estimate that as banks continue to pay off their loans to these programs, taxpayers can expect another $14 billion of money coming back in for a total of about $20 billion in “profits.”
 
“While our overriding objective with TARP was to break the back of the financial crisis and save American jobs, the fact that our investment in banks has also delivered a significant profit for taxpayers is a welcome development,” said Treasury Secretary Tim Geithner in a press release. “We still have more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP.”
 
One caveat -- these programs which have turned a profit don’t include the massive injection of taxpayer money into failed insurance firm AIG or housing giants Fannie Mae and Freddie Mac. We’ll likely see massive (read $100 billion) in losses from those “investments.” But those losses are likely going to be offset by huge gains the Federal Reserve has made on purchases of American mortgages and other securities since the beginning of the financial crisis. Anything the Fed makes goes right back to Treasury (No “performance bonus” for Fed Chairman Bernanke or the other folks at the Fed).
 
When all is said and done, Uncle Sam is likely to have made about $24 billion more than he lost on all this financial maneuvering.

Copyright 2011 ABC News Radio

Monday
Feb142011

General Motors Announces Bonuses For Hourly Workers

Photo Courtesy - Getty Images(DETROIT) – In documents unveiled Monday, it was revealed that General Motors plans to give bonuses of at least $4,000 to each of its 45,000 hourly workers in the United States.

The car giant, which employs over 200,000 people across the globe, is on track to make its first annual profit since 2004. General Motors was a recipient of several billion dollars in federal relief money, which was paid back in full by April, but it has already announced over $4 billion in profit through the third quarter of last year.

This move by GM comes after an announcement by Ford, which said it will be giving bonuses of $5,000 to its United Auto Workers employees.

Both GM and Ford announced white-collar workers within their companies would be getting bonuses as well.

Copyright 2011 ABC News Radio

Friday
Feb042011

Federal Regulators: Commercial Real Estate Market Still Distressed

Photo Courtesy - Getty Images(WASHINGTON) -- Though the commercial real estate market has seen signs of stability, financial regulators acknowledged Friday the market remains strained and will need time to fully recover.

Financial regulators and industry experts went before the TARP Congressional Oversight Panel in a hearing to examine the commercial real estate market and its implications on bank stability.

“The term of a commercial loan creates a lag between the moment the market collapses and the moment that the economic impact is felt,” Chairman Ted Kaufman said. “The fuse has been lit, but no one knows how much damage will occur when it finally burns down.”

In prepared testimony, a Fed official said that losses in the commercial real estate market do not pose a threat to large banks.

“Notably, CRE concentrations are not a significant issue at the largest banks,” said Patrick Parkinson, director of the division of banking supervision and regulation at the Federal Reserve.  “While problems in the CRE market will be an ongoing concern for a number of banking organizations and a negative factor for economic growth and lending, we do not see CRE losses as a threat to systemically important financial institutions.”

Despite this little impact on big banks, panel members said uncertainty still remains on the course to recovery for the commercial real estate market, particularly concerning small banks.

Copyright 2011 ABC News Radio

Thursday
Dec162010

Geithner Says Financial Recovery Amounts to 'Fraction' of Estimated Cost

Photo Courtesy - Darren McCollester/Getty Images(WASHINGTON) -- Treasury Secretary Timothy Geithner told a congressional oversight panel Thursday morning that the cost of the federal financial rescue program will ultimately be only a “fraction” of the cost originally estimated by the Congressional Budget Office.

“We have brought stability to the financial system and the economy at a fraction of the expected costs,” Geithner said in prepared remarks for the hearing.

Recently, the CBO estimated that the TARP program will cost the government $25 billion, far lower than the original estimate of $350 billion, and Geithner suspected that the $25 billion estimate might be “too high.”  Geithner further said the combined costs of efforts by the Federal Reserve and FDIC coupled with TARP and the losses inflicted by Fannie Mae and Freddie Mac will amount to less than one percent of the GDP.

Geithner defended the TARP program calling it “one of the most effective crisis response programs ever implemented.”

“The American financial system today is in a much stronger position than it was before the crisis.  There's been a very dramatic restructuring of our financial system.  The weakest parts of the system no longer exist today.”

But the panel’s chairman, Sen. Ted Kaufman, pointed out that Americans still feel the stress of the financial crisis despite the recovery of large financial institutions, comparing it to a “let them eat cake” situation.

“Many people simply feel their lives have not gotten better during this period, even as the financial system has stabilized and banks have returned to profitability,” Kaufman said. “The problem we have out there now is people don't have jobs, and people can't borrow money.”

Geithner assured the panel that the government will continue to invest in programs to bring greater relief to individuals while also attempting to stave off any future financial collapse.

“We have to worry how to clean up this mess for the future, make sure we don't get into this kind of mess in the future again,” Geithner said.  “Our overwhelming preoccupation now is, what can we do to make sure that  we're helping people stay in their homes who can afford to, and make sure we get through the damage remaining, at least risk to the innocent people that have suffered so much in this crisis.”

Copyright 2010 ABC News Radio

Wednesday
Oct062010

TARP's Final Price Tag Relatively Low 

Photo Courtesy - Getty Images(WASHINGTON) -- There’s been a lot of anger about the government’s Troubled Asset Relief Program and it’s $700 billion price tag to bail out U.S. banks, insurance companies and automakers.

While the jury is still out over how well financial institutions and car companies are faring, the Treasury Department says that the actual cost of TARP will be around $50 billion after everything is paid back.  That's the equivalent of less than one percent of the Gross Domestic Product.

In fact, the actual bill might be closer to $30 billion following the Treasury’s arrangement with AIG that mandates the insurance giant will return a good chunk of the $180 billion it was loaned to avoid collapse.

As for just how effective TARP was, the Obama administration contends it restored confidence in the nation’s financial system by unfreezing markets for credit and capital.

TARP expired last Sunday after two years of critics complaining that it did little to revive the economy while costing taxpayers hundreds of billions of dollars.

Copyright 2010 ABC News Radio

Friday
Oct012010

Government Rescue Ends Sunday

Photo Courtesy - Getty Images(WASHINGTON) -- The government's $700 billion taxpayer bailout of the financial system will come to an end Sunday, bringing to a close one of the most controversial programs in economic history.

But the political ramifications of the Wall Street bailout live on and seem sure to haunt lawmakers come November.

Supporters say the Troubled Asset Relief Program rescued the country from another Great Depression. Critics counter that it simply handed money to the same Wall Street banks that plunged the country into recession in the first place and, moreover, it failed to help Main Street Americans.

The political back-and-forth has been fierce. Republicans, led by President Bush, first pushed the program through Congress in the fall of 2008. But with the 2010 mid-term elections fast approaching, Republicans are trying to capitalize on the program's unpopularity by tying Democrats, including President Obama, to the bailout.

Democrats, meanwhile, have been put on the defensive, standing up for a program that was the brainchild of a Republican administration. While the president has repeatedly noted that he understands why the program is so deeply unpopular, he also continues to defend its effectiveness.

Obama said in Rolling Stone magazine last week the program will ultimately cost taxpayers far less than had initially been feared.

"The truth of the matter is that TARP will end up costing probably less than $100 billion, when all is said and done," he said. "Which I promise you, two years ago, you could have asked any economist and any financial expert out there, and they would have said, 'We'll take that deal.'"

Copyright 2010 ABC News Radio







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