A lot of numbers were thrown around in the fall of 2008 as one by one several of the country’s major financial corporations dropped like dominoes. Here’s a small (not all inclusive) recap:

  • September 7: Freddie Mac and Fannie Mae were seized by the government with approximately $5 trillion worth of mortgages.
  • September 15: Lehman Brothers filed for bankruptcy.
  • September 16: The government gave AIG an $85 million emergency loan (followed by another loan of $37.8 billion less than a month later as well as another bailout of $40 billion in November).

And from there, things continued to get worse as home values dropped, the unemployment rate surged, and the government’s purse kept getting deeper and deeper.

Former President Bush signed the Emergency Economic Stabilization Act of 2008 on October 3, 2008, allowing the Treasury up to $700 billion to purchase distressed assets, mortgage-backed securities, and make capital injections into banks through the Troubled Asset Relief Program (TARP). From this new program and the money all ready loaned to institutions, Americans were looking at a potential tab of $800 billion+. Gulp.

Since the fall of 2008, the news has moved on to the next best drama and only tidbits of the TARP have been reported.

Of the $700 billion, how much was given out, and how much has been paid back?
      

The Magic Number

The Emergency Economic Stabilization Act of 2008 has actually expired. As of October 3, 2010, no further loans can be made. In all, approximately $387 billion was given out through this program.

The total cost of the bailout to American taxpayers was anywhere from $51 billion to $66 billion, depending on if you are talking to the Congressional Budget Office, the Treasury Department, or the White House. These numbers also continue to change as the Treasury earns profits from some of its stakes in companies, and as others continue to pay the government back.    

Some of the Big Players

Money Made by Taxpayers

So how did the government give out so much money in loans and only lose between $51-$66 billion? It’s because they made money on some of the TARP funds. Profits include approximately $13 billion from bank dividends, and $8.2 billion from the sale of preferred stock. And with a 60% stake in GM, and a $49 billion stake in AIG, there is the potential to make back even more money in the coming years.

After researching for and writing this article, I came away surprised at the low cost to American taxpayers compared with the nightmare scenarios proposed two years ago.

With the media and political campaigns touting the $700 billion number so much, I assumed that most of that money was gone, and that we were lucky to get some of it back.

Are you surprised at the actual taxpayer cost?






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Comments to Two Years After the Bank Bailouts: Has Taxpayer Money been Repaid?

  1. No. I know going into the TARP that we would actually made money, that is how Bailouts work, the Governments make money on them usually. They get paid for providing the market with liquidity as no one else had the capital or the inclination to do so.

    Sean

  2. Thanks for the Article though, as many people are not aware of these facts. Sorry if I came off as an A-hole.

    Sean

  3. As a Canadian, it shocks me how much money the federal gov’t invested in these companies in such a short period of time. But I agree with the above commenter, it was almost needed to ensure the market had the liquidity needed to function.

    twentysomethingmoney

    • Hello twentysomethingmoney!

      It is shocking…and then I wonder how badly things would have been had they not? Perhaps they would not have been as bad as some people would have us believe.

      Amanda L Grossman

      • Considering that liquidity had all but evaporated, it isn’t an exaggeration to say that things would have been bad — very, very bad. As in imagine going to the bank and not being able to withdraw any money.

        Still, I take issue with the constant insinuation that TARP was the ONLY option on the table. We could have done what Sweden did when it faced a financial crisis in the early 1990s and forced banks to write down their assets immediately in exchange for access to government cash. That would have ensured that banks get back to lending quickly, instead of looking to shed their losses over time (which puts a long-term drag on the economy – just look at Japan). A good summary of that approach can be read here:

        http://www.nytimes.com/2008/09.....krona.html

        Rimaye


  4. A bit over a decade ago, US bailed out Mexico, giving them a few billion. There were just as many “terrible scenario” claims back then, including that “we’re just giving away money,” and that the money will never be seen again. The money was all paid back with interest, US government made a profit, and no one really mentioned it after. I pretty much assumed that the claims about TARP were the same, and all just to gain political points.

    Rassah

  5. Government bailed out companies and people that did the wrong thing, and now they are even more “too big to fail.” Little banks that did the right thing got bought up by big banks that cheated, lied, or just plain sucked, and your tax dollars were used to do it. Did anyone even get fired, much less put in jail? Didn’t think so. Why do the right thing in the U.S. when there is no downside to doing the wrong thing?

    This applies to housing, too. People who bought too much with money they don’t have get coddled and bailed out, and housing prices are kept artificially high, thus punishing people who save and do the right thing.

    Wes

  6. Great article. Thanks for all the details. Slightly surprised as I thought the government was just printing funny money as usual. Glad we did get some of it back. Hopefully government learns from this as we were in pretty bad shape. Glad things are turning around a bit, but if nothing is learned, this cycle will rear its ugly head again sometime in the future.

    Buck Inspire


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