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Luke
08-28-2009, 09:46 AM
Where did you get 1.1 trillion? The original TARP allocated 700 billion and all of that hasn't been used yet.

From the site US News referenced...

ProPublica | Eye on the Bailout (http://bailout.propublica.org/)

king183
08-28-2009, 10:11 AM
Where did you get 1.1 trillion? The original TARP allocated 700 billion and all of that hasn't been used yet.

Good site to look at TARP

Tracking the $700 Billion Bailout - The New York Times (http://projects.nytimes.com/creditcrisis/recipients/table)

I believe the $1.1 trillion figure includes new national debt added (the total cost to the nation), while the $700 billion is the amount of capital committed to the program.

mugofbeer
08-28-2009, 11:18 AM
So, about the TARP money being paid back...

Where Bailout Money Goes to Die - Rick Newman (usnews.com) (http://www.usnews.com/blogs/flowchart/2009/07/28/where-bailout-money-goes-to-die.html)

Again, this may be how some taxpayers wanted their money to be used. But, gaging the interest that taxpayers had regarding this issue and legislator phone lines burning in DC, the vast majority of taxpayers did NOT want their money to be used for this.


The problem with discussing how "taxpayers wanted their money to be used" is that it states the obvious - NONE of us wanted our money to be used this way. However, using our money this way HAD to be done or else we would be sitting here with 30% - 40% unemployment rather than 10%. Sometimes, government has to take action without making a determination if the public favors it because the simple truth is, the vast majority of the public doesn't understand why we are in a recession and doesn't understand why the government is doing what it is doing to get us out of it. Therefore, what the public feels is a moot point. IT HAD TO BE DONE.

As I have mentioned in other threads, one needs to take what they read on the internet and in the media with a serious grain of salt. "Where TARP Bailout Money Goes To Die" insinuates that the entire story is over and TARP has been a massive failure. When non-business oriented media starts reporting on economic and business matters, be very careful. They will slant the reporting to show the worst possible scenario. Virtually all media reports fail to recognize that TARP bailouts are INVESTMENTS. The US taxpayer is an "owner" and an "investor" in all of the TARP recipients now. US News has been no exception to the incomplete reporting and the Ethisphere report mentioned earlier is rather dated. The markets have improved dramatically.

Here is an excerpt from the Ethisphere report referred to in another comment: "According to the Ethisphere TARP Index, when markets closed on Friday, June 19, 2009, the government’s Troubled Asset Relief Program (TARP) investment was down approximately $148.2 billion. Created by the Ethisphere Institute, a non-partisan research think-tank, the Ethisphere TARP Index tracks the U.S. Federal Government’s return on its investments under the capital purchase portion of TARP and the government’s accompanying loan guarantees provided to Bank of America and Citigroup. With ten of the nation’s leading banks now having paid back their TARP funds, these investments stand at $510.7 billion. To date, each taxpaying household has lost $1,233."

“The $68 billion pay back of TARP funds caused a drop in the bottom line of the Ethisphere TARP Index, but the overall percent decline didn’t see much change,” said Stefan Linssen, Managing Editor of Ethisphere Magazine and one of the lead research analysts behind the Ethisphere TARP Index. “Aside from the large asset guarantees of Citigroup, the last big heavyweights in the Index now are Bank of America, AIG, Citigroup’s CPP money and Wells Fargo, and unfortunately, they are still weighing down the Index. However, with the pay back of TARP money this past week, taxpaying households did see a decrease in the losses they have suffered under TARP, going from $1,361 to $1,233.”

This is the most recent report on the index I could find and it references that it is as of June 19, 2009.

Company Name 06/19/09 08/27/09 % Gain
Bank of America $13.22 $17.92 35.55%
AIG $30.60 $47.84 56.34%
Citibank $3.17 $5.05 59.31%
Wells Fargo $24.19 $27.74 14.68%

So, though the government owns preferred shares of each of the above companies, the preferred shares are convertible into common stock (which is how they gain "ownership" of the companies). As you can see, the market value of common stock for each of these 4 large recipients of TARP money have posted tremendous martket value gains since that last index was taken. Therefore, the significant losses reported by the media on the TARP investments have improved dramatically - specifically since that Ethisphere index of 6/19/2009. I don't have time to figure out the gains and losses, but some of these may actually represent capital gains now.

The media would have you believe that all TARP investments will go to raise the deficit. This is 100% wrong! In fact, as can be seen above, it is very possible the government will actually profit from the investment. This happened in the early 1990's with the similar bailout of the Savings and Loans and the real estate bought by the government.

Luke
08-28-2009, 12:02 PM
However, using our money this way HAD to be done or else we would be sitting here with 30% - 40% unemployment rather than 10%.

Well, it didn't HAVE to be done. And nobody knows what would have happened. We may have been better off sooner if they had failed naturally.


Sometimes, government has to take action without making a determination if the public favors it...

Yikes.

And the more that happens with any issue and the more apologists defend that action, the more that exact excuse will be given for a future removal of even more of our apparently government bestowed rights.


...because the simple truth is, the vast majority of the public doesn't understand...

You sound like someone who would favor passing a test before voting.

Again, the public not "understanding" is not a good excuse to take away their will. For several reasons... 1) If the public wants something no matter what the "experts" say, let them have it. Then if it goes wrong, they are to blame. As it is, they just harbor resentment towards the very ones they elected. 2) If not "understanding" is a big deal to elected officials, then they should do something about it besides going against the will of the very ones that got them elected. 3) If the ignorant populace "doesn't know what they're talking about" then what does that say about the ones they elected? 4) The excuse of "not understanding" is simply one more step in the death march to goverment controlling more and more of our lives.


...one needs to take what they read on the internet and in the media with a serious grain of salt.

I agree. But don't take what constituents say with a grain of salt. Even if it is (supposedly) to their own detriment.

mugofbeer
08-28-2009, 12:30 PM
Well, it didn't HAVE to be done. And nobody knows what would have happened. We may have been better off sooner if they had failed naturally. [QUOTE]

Given the facts of what we were facing in mid October of last year - Bear Stearns had failed, Lehman Brothers was allowed to fail, nearly every major bank and insurance company in America was near insolvency, virtually the entire world's credit system was locked up. Regional and small banks are still failing in large numbers. Money market funds - the last refuge of safety in non-banks were in danger of losing value. This has never happened before in history.

In 25 years in the financial services industry, including the market crash of 1987, its the first time I have seen large scale panic among virtually all investors - individual and institutional. - yeah, its pretty easy to see what was going to happen, which was worldwide depression. I truly am not trying to sound insulting toward you but its hard with text - your view is ignorant of how a capitalistic economy works. WE WOULD BE IN DEPRESSION HAD THE FED NOT TAKEN THIS ACTION.

Watch PBS Frontline episode that reports on the action between the Federal Reserve, the Treasury and the Major banks in October. It is frightening. CNBC is also going to be running a series of shows in September putting the entire last year and a half into perspective. They have generally been pretty accurate because they specialize in business reporting.

[QUOTE=Luke;250467]Yikes.

And the more that happens with any issue and the more apologists defend that action, the more that exact excuse will be given for a future removal of even more of our apparently government bestowed rights.

You sound like someone who would favor passing a test before voting. [QUOTE]

Last October was an unprecedented national and worldwide emergency. Time simply would not have allowed any sort of educational period. Action had to be taken over a matter of a weekend while most worldwide markets were closed in order to have prevented a meltdown the following Monday. It was bad enough but it would have been far, far, far worse.

[QUOTE=Luke;250467] Again, the public not "understanding" is not a good excuse to take away their will. For several reasons... 1) If the public wants something no matter what the "experts" say, let them have it. Then if it goes wrong, they are to blame. As it is, they just harbor resentment towards the very ones they elected. 2) If not "understanding" is a big deal to elected officials, then they should do something about it besides going against the will of the very ones that got them elected. 3) If the ignorant populace "doesn't know what they're talking about" then what does that say about the ones they elected? 4) The excuse of "not understanding" is simply one more step in the death march to goverment controlling more and more of our lives.
[QUOTE]

Answer to 1) - Luke, we weren't playing with something that could have been fixed and chalked up to experience had it failed. Millions upon millions of ADDITIONAL jobs would have been lost. We would have experience soup lines on the streets. Just as Bill Clinton rode the tide of the Tech Boom to economic success in his administration, the politicians of today have to simply accept the resentment from some of their constituents today as a loss/loss situation. It had to be done.

Answer to 2) Again, it was an unprecedented worldwide economic calamity on the brink of happening. Action had to be taken right then. A week later would have been too late.

Answer to 3) Yeah, there are an awful lot of politicians that would be better off selling shoes than leading our country (Nancy Pelosi). However, those in the Federal Reserve are pretty **** brilliant, believe it or not. That's thanks to the fact its not a political arm of the government. Just look at Minnesota electing a pro wrestler as governor and Stuart Smalley as Senetor to guage the intelligence of who we send to Washington. We've elected plenty of "winners" in OK, too.

4) This is why the US is a Republic and not a true Democracy. You have to allow your elected officials to sometimes make what will prove to be unpopular decisions in extraordinary times that are what is best for the country.

[QUOTE=Luke;250467]I agree. But don't take what constituents say with a grain of salt. Even if it is (supposedly) to their own detriment.

Well, of course not. But at the same time when the cards are laid out and the hard Solomon-like decision has to be made, its time to get serious and do what is right for the country and the world, no matter how unpopular it may seem.

Trust me, I have talked to literally thousands of people in my career who are extraordinarily ignorant about personal finance. They get $10 in their pockets and its off for cigarettes and beer. Nevermind, they probably have bills to pay and payments to make with that money.

Trying to understand macroeconomics and the fact the entire world is economically intertwined is a whole field of study in itself. Thats why I am trying to stress that I am not trying to insult anyone by using the word "ignorance". Its simply a lack of truly understanding what the situation was last fall and how extraordinarily close we came to worldwide economic calamity.

soonerguru
08-28-2009, 02:46 PM
Money market funds - the last refuge of safety in non-banks were in danger of losing value.

I'm glad you mentioned this, as it doesn't receive much attention. There was a congressman on Charlie Rose describing the events of, I believe, Sept. 19th. This congressman was on the banking finance committee in Washington.

Apparently, the Fed noticed that beginning at 11 a.m., there was an electronic "run on the banks" that was rapidly depleting money markets. The Fed stepped in and pumped a ton of liquidity in the market. Had they not done this, the whole international system would have cratered within 24 hours.

This is complicated stuff. Those of us who do not understand the Fed would scarcely understand the dynamics, but there was a clear reason Bush looked white as a sheet when he delivered that prime-time news conference.

It's bizarre to think who the unlikely partners were who worked to resolve this crisis: Ben Bernanke, a student of the Great Depression, George W. Bush, Barack Obama, Barney Frank, a lot of Democrats and several Republicans (including, to a lesser degree, John McCain), who worked together to stave off the crisis. (NOTE: I should add Tom Coburn to this list).

They will probably not receive any public accolades for what they did, but Thank God they did something fast.

mugofbeer
08-28-2009, 04:51 PM
It may have been Sept. 19 but I wager it may have been Oct. 19. Anyway, few people realize how close to the brink we came. I stress when I use this word, I am not trying to insult anyone, but the vast majority of American's are too ignorant of macroeconomics and don't know some of the inner workings of what went on in October 2008 to understand. The government came together and did its job for a few days in October.

soonerguru
08-28-2009, 09:44 PM
It may have been Sept. 19 but I wager it may have been Oct. 19. Anyway, few people realize how close to the brink we came. I stress when I use this word, I am not trying to insult anyone, but the vast majority of American's are too ignorant of macroeconomics and don't know some of the inner workings of what went on in October 2008 to understand. The government came together and did its job for a few days in October.

I think you're right about that. However, there were some scary precursors that started happening in August as well.

mugofbeer
08-28-2009, 10:21 PM
I think you're right about that. However, there were some scary precursors that started happening in August as well.

I believe it was actually the summer of 2007 that the first warnings of problems with the Fannie Mae and Freddie Mac portfolio's and warnings that if those companies had been held to the same accounting standards as other corporations, they would be in real trouble. However, the first real concerns started popping in the summer of 2008 and then began to really get serious in Sept. October brought the meltdown.

Luke
08-29-2009, 05:34 AM
I understand what you're saying.

I guess I'm just saying there are other economists who disagree with your foreseen outcome and suggest a better outcome had the government stayed out. A root problem is the fiat-money-printing Fed. Also, from what I can tell, it comes down to two general schools of economic thought: the Austrian school and the Keynesians.

soonerguru
08-29-2009, 11:40 AM
Luke,

I don't have a link, but I read yesterday that Barney Frank is teaming up with Ron Paul to pass a bill to audit the Federal Reserve and provide more Congressional oversight of their actions. Interesting development.

mugofbeer
08-29-2009, 08:40 PM
Luke,

I don't have a link, but I read yesterday that Barney Frank is teaming up with Ron Paul to pass a bill to audit the Federal Reserve and provide more Congressional oversight of their actions. Interesting development.

This would be a dangerous move. The Federal Reserve was granted independence so it would not be affected by political pressures. I question why Mrs. Frank and Paul would want to do this considering the Fed directors are light years more intelligent than either of those dimwits.

soonerguru
08-29-2009, 10:29 PM
he Fed directors are light years more intelligent than either of those dimwits.

One could reasonably argue that the Fed hasn't always demonstrated such intelligence, such as under Mr. Greenspan.

mugofbeer
08-29-2009, 10:48 PM
In general, the Fed under Mr. Greenspan did a marvelous job. The current recession wasn't his fault, he tried to warn the public and the politicians with his "irrational exuberance" commentaries if you recall.

soonerguru
08-29-2009, 11:50 PM
In general, the Fed under Mr. Greenspan did a marvelous job. The current recession wasn't his fault, he tried to warn the public and the politicians with his "irrational exuberance" commentaries if you recall.

He is very responsible. He did do a fine job for most of his term but actually cheerleaded the run-up in housing prices, defended the bizarre and exotic lending, and held interest rates to a point for two straight years.

He seems like a wise man that just went off the tracks for a few years, but don't kid yourself, he played a major role in screwing us.

mugofbeer
08-30-2009, 12:39 PM
I disagree to some extent. The run-up in housing prices were as a result of his attempt to keep a strong economy while keeping inflation in check. If you recall, we had a long period of stable commodity prices. Stable commodities keeps inflation down (there was even concern of DIS-inflation which was a secondary cause for our recession). He attempted to raise interest rates once or twice which resulted in extremely bad reactions from the markets causing significant slowdown to growth. This forced interest rates back down. To raise interest rates without inflation is very damaging to an economy.

The inflation in home prices, to a great extent, can be good because it results in the creation of a lot of wealth. Unfortunately, the extremely low interest rates caused people to take out their equity and spend their money rather than save it in their houses. He warned us that this could be potentially dangerous and that the savings rate rate was too low while the rate of debt acquisition was too high.

In retrospect, it would have been better for him to raise rates in spite of a shorter-term economic slowdown. I think the lesson is that when money is "given away" for too long a period, people over-extend themselves. This is part of the criticizm of what the fed is doing now, giving money away to stimulate the economy and putting us back into the same quandry. The difference this time is that it is the government getting overextended, not the public.