Happens to me quite often no matter how brief and economical I try to be with the words.
Anyway, there's this awesome cat, Lodo Grdzak, who classes up my joint every once in a while. I always appreciate when he stops by to leave a comment because even though we disagree on a lot of things, he's always thoughtful and writes intelligently. Seriously, this guy has some great perspective, an original voice, great stories and amazing taste in music. Really, if I wasn't already married... Well, I highly suggest you make his blog a regular stop in your RSS reader.
So why do I bring this up? Well I'm glad I asked.
Lodo dropped by recently and commented on my previous post re: Goldman Sachs. Here it is in it's entirety:
As a bit of a digression, I couldn't help but notice you failed to mention the billions of dollars made by the government in the TARP bailouts. Not only was all TARP money paid back; but at a huge profit to the government. Even Citi's loan (the most volatile of the banks) would yield a $10 billion profit to the government if we cashed-in our Citi stock now. But the government's waiting 'cause we'll make a lot more money than that. Obama's handling of the financial crisis (the worst since the Depression--'caused by Libertarian speculators that didn't want SEC oversight within the financial institutions) has been nothing short of genius. Particularly when you consider he handled it while planning war strategy in Afghanistan, passed health care reform (easy task I know), and had to appoint a Supreme Court judge. GM has paid back close to $2 billion dollars of their loan, and once they start selling stock again, the government's gonna clean up on that deal. All while maintaining 900,000 jobs. When you're wrong, you're wrong. And you should admit that the bailouts worked and retract comments you've made in the past that said they wouldn't.I started to respond, but again ran out of characters. So I wanted to get this out there as a new post because, wow, there are a lot of claims in all of that.
I'll try to respond to each the best I can. But let me start by saying everyone should go easy on the Obama Koolaid. It's potent stuff.
I won't call the TARP campaign a "success" as such. Yes, companies have been saved. But we have succeeded in saving companies that should not have been saved in the first place. We have continued a precedence that started in the 1970s, where the government puts a ton of money behind a failed busies keeping it alive long after it should have died. These zombie corporations only serve to encourage bad/risky behavior by other business down the line.
If a company has no fear of being buried, it has no reason to act responsibly. John Q. Taxpayer is always there to bail them out as long as you grease the right palms in Washington. Hey, don't take my word for it. People much smarter than me have already pointed this out. I'm just the messenger, man.Secondly, in regards to the success of the bailouts, I think it's important to note that the TARP program was "only" $700 billion. Yes, that is an insane amount of money to waste on zombie corporations. But keep in mind that amount is a fraction of the $12 TRILLION committed in all of the bailout schemes.
The assertion that GM has totally repaid it's TARP loan is somewhat true. The problem is that, of the $50 billion that GM borrowed, it repaid only $6.7 billion in cash. The rest, was "repaid" in equity in the company, which means that the US Government owns 60 percent of post-bankruptcy GM. Since that stock is no longer traded, you can't really peg a value to that 60% holding, but it sure as hell isn't worth $43 billion (last trade was for 75 cents a share).
Furthermore, I'm sorry but saying that TARP has been totally repaid is just incorrect. According to ProPublica, just over $391 billion was disbursed, of which more than $186 billion is still outstanding. If you include Fannie Mae and Freddie Mac in that, there's another $119 billion outstanding, bringing the total to over $300 billion that still needs to be repaid.
Regarding Citi, I'm not sure what Lodo's source was, but again according to ProPublica, Citigroup took $45 billion from the government and has returned about $23 billion, leaving them $22 billion in debt to us taxpayers. It's difficult to accept that we would realize a $10 billion profit "if we would cash in our stock" because the stock would immediately resume its downward spiral if the government decided to sell it.
Lodo also points out that the government-owned companies have seen nice stock gains, or at least stable stocks. This shouldn't be a surprise. Taking the investor's point of view, buying stock in a company owned by the US Government is pretty much a sure thing. Since we have a couple of years before our government is crushed under the fiscal weight of entitlements, bailouts and pork spending, investors can rest assured that companies owned by the government have been and will be bailed out of any mismanagement. At least until society completely breaks down in 2012 and we all get jobs as Road Warriors.
However, you should keep you eye on those stocks if/when Uncle Sam decides to sell.
As for the jobs situation, The Bureau of Labor Statistics recently reported that nearly half of states are still reporting increases in unemployment. Unemployment is still above 9 percent nationally, so it's still too soon to congratulate Obama on his masterful handling of jobs and employment policy.
The war stuff? Well, we're still at war, we'll have troops in the Iraq and Afghanistan for the foreseeable future, and Obama supporters don't seem to care about that now that it's their guy in office.
Anyway, the upshot of all of this it that we're a long way from me admitting I was wrong about the bailouts.
EDTI. — In response a question about citing Pro Publica as as source, they are an independent group of journalists and one of the few highly credible information sources on the Internet. Here's what they say in their About page:
ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest. Our work focuses exclusively on truly important stories, stories with “moral force.” We do this by producing journalism that shines a light on exploitation of the weak by the strong and on the failures of those with power to vindicate the trust placed in them.I strongly suggest you begin frequenting their website.
tagged: Obama, bailouts, TARP, Doomsday Cycle, economy, General Motors, unemployment