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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsShaky Banks Still Haunt the Bailout
Right now, taxpayers are in the black on the program that bailed out banks. But weaker banks that havent repaid their loans may still leave us in the red. Thats the problem the Government Accountability Office points to in a new report looking at the governments single largest bailout effort, the Capital Purchase Program. Treasury started CPP in October 2008 to provide liquidity and stability for banks. Ultimately Treasury propped up more than 700 banks with almost $205 billion. The banks make dividend and interest payments to Treasury; then, to exit the program, they repurchase warrants and preferred shares and repay loans. The GAO says those revenue sources have brought in $211.5 billion for taxpayersa $6.6 billion profit above the initial infusion into the institutions.
But the pictures not all rosy. First, the GAO says that almost half of the banks that have exited CPP did so by refinancing their debt into other Treasury-run programs, in particular the Small Business Lending Facility and the Community Development Capital Initiative. Second, the GAO highlights 366 banks that havent repaid CPP and still owe a combined $16.7 billion. Those banks, the GAO says, are less healthy than the banks that have already repaid CPP and other similar-size banks which didnt participate in the program at all. In December 2011, 130 of the remaining banks were on the FDICs problem bank list, meaning their viability is threatened by financial, operational, or managerial problems. And 158 banks missed their quarterly interest and dividend payments to the Treasury in November 2011.
The ability to collect on the outstanding $16.7 billion will depend in particular on a small concentration of banks. The GAO says two-thirds of the outstanding investments are concentrated in 25 institutions. Topping its list are Alabamas Regions Financial (RF), which owes $3.5 billion, Utahs Zions Bancorporation (ZION), which has $1.4 billion to go, and Georgias Synovus Financial (SNV), with $968 million outstanding. The GAO says Treasury hasnt taken into the account the health of the remaining GPP banks to determine if they could lead to potential losses that may counteract the profits taxpayers have made from the early repayers.
All of this is just in CPP, one corner of the bailout. Other parts of TARP are still outstanding. Just this week Treasury sold shares of AIG (AIG), reducing taxpayer ownership of the insurer to about 70 percent. Treasury still has investments in General Motors (GM), Chrysler, and Ally Financial through the auto bailout. And then theres Fannie Mae and Freddie Mac, whose own bailouts were separate from TARP entirely. Theyve been borrowing more money from Treasury to make the dividend payments they owe back to Treasury. (If you want to dig into more data about who got and owes what, the interactive database by the investigative newsroom ProPublica is a go-to source.) All this means that while Treasurys making progress in unwinding CPP and other programs, there still is a ways to go.
http://www.businessweek.com/articles/2012-03-09/shaky-banks-still-haunt-the-bailout
msongs
(67,433 posts)marasinghe
(1,253 posts)this SNL clip, featuring Russell 'Banks'?
http://www.nbc.com/saturday-night-live/video/British-Movie/1291796
on YouTube:
girl gone mad
(20,634 posts)xchrom
(108,903 posts)Selatius
(20,441 posts)I could get a better ROI on CDs at my credit union.
banned from Kos
(4,017 posts)This demonstrates how pervasive the Great Asset Crash was.
The housing bubble burst. The country was gripped in a mania for years over homes - flipping them.