Dogman
6th October 2010, 06:04 AM
http://www.thestreet.com/story/10880777/1/tarp-is-still-as-popular-as-a-root-canal.html?puc=_tscrss (http://www.thestreet.com/story/10880777/1/tarp-is-still-as-popular-as-a-root-canal.html?puc=_tscrss)
NEW YORK (TheStreet) -- For all the public rage about "bank bailouts," it may be surprising for some taxpayers to learn that the most profitable segment of the $700 billion Troubled Asset Relief Program has been directed at banks, while the most costly initiatives by far have been those aimed at rescuing troubled homeowners.
A broad overview of TARP released by the Treasury Department on Tuesday estimates that investments in the banking industry will return $16 billion to taxpayers. Even American International Group (AIG_) - which represents the largest bailout of a single private company - stands to return $17 billion to taxpayers when all is said and done. Other programs meant to spur private buyers into the market for toxic assets stands to deliver a $1 billion return.
Those figures compare with a $46 billion loss on housing programs meant to help struggling homeowners and a $5 billion loss on investments in the auto industry. The U.S. Treasury Department also expects to incur "substantial losses" from Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), whose bailout cap of $400 billion was lifted to a unlimited amount at the end of 2009.
On a net basis, the Treasury expects to lose $29 billion on its bailout programs, excluding those mortgage-finance giants. That represents 1% of gross domestic product, vs. 2.4% for the savings and loan crisis two decades ago and a 13% average for 40 global banking crisis since 1970, according to the International Monetary Fund.
Yet those sunny statistics haven't done much to win over Americans still fighting their own financial fires. Since the $700 billion TARP was rolled out by then-Treasury Secretary Henry Paulson in the fall of 2008, public opinion polls have consistently reflected anger and frustration regarding "bank bailouts."
"You have an anger at Joe-The-Plumber level," says Jack Reutemann, a financial adviser who heads Research Financial Strategies. "John Thain walks off with a multimillion dollar compensation package. JPMorgan (JPM_) and Goldman Sachs (GS_) walk away with billions of dollars in taxpayer bailouts. You have GM labor unions getting taxpayer bailouts. But Joe The Plumber loses his house and his job."
Reutemann is philosophically against bailouts in general, saying the government made a dire mistake when it inserted public funds into private markets, disrupted ordinary bankruptcy processes and designated some firms as too big to fail. "Even though short-term, I'm sure the Treasury Department can make an argument that it's getting its money back with a profit, it has perverted the system," he says.
NEW YORK (TheStreet) -- For all the public rage about "bank bailouts," it may be surprising for some taxpayers to learn that the most profitable segment of the $700 billion Troubled Asset Relief Program has been directed at banks, while the most costly initiatives by far have been those aimed at rescuing troubled homeowners.
A broad overview of TARP released by the Treasury Department on Tuesday estimates that investments in the banking industry will return $16 billion to taxpayers. Even American International Group (AIG_) - which represents the largest bailout of a single private company - stands to return $17 billion to taxpayers when all is said and done. Other programs meant to spur private buyers into the market for toxic assets stands to deliver a $1 billion return.
Those figures compare with a $46 billion loss on housing programs meant to help struggling homeowners and a $5 billion loss on investments in the auto industry. The U.S. Treasury Department also expects to incur "substantial losses" from Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), whose bailout cap of $400 billion was lifted to a unlimited amount at the end of 2009.
On a net basis, the Treasury expects to lose $29 billion on its bailout programs, excluding those mortgage-finance giants. That represents 1% of gross domestic product, vs. 2.4% for the savings and loan crisis two decades ago and a 13% average for 40 global banking crisis since 1970, according to the International Monetary Fund.
Yet those sunny statistics haven't done much to win over Americans still fighting their own financial fires. Since the $700 billion TARP was rolled out by then-Treasury Secretary Henry Paulson in the fall of 2008, public opinion polls have consistently reflected anger and frustration regarding "bank bailouts."
"You have an anger at Joe-The-Plumber level," says Jack Reutemann, a financial adviser who heads Research Financial Strategies. "John Thain walks off with a multimillion dollar compensation package. JPMorgan (JPM_) and Goldman Sachs (GS_) walk away with billions of dollars in taxpayer bailouts. You have GM labor unions getting taxpayer bailouts. But Joe The Plumber loses his house and his job."
Reutemann is philosophically against bailouts in general, saying the government made a dire mistake when it inserted public funds into private markets, disrupted ordinary bankruptcy processes and designated some firms as too big to fail. "Even though short-term, I'm sure the Treasury Department can make an argument that it's getting its money back with a profit, it has perverted the system," he says.