Monday, August 31, 2009

Tax Payers Get Wall Street Profits

Just in case you missed this, it appears that taxpayers made some money from the Wall Street Bailout as reported by The Daily Beast article below:

Here's a surprise: Almost a year after the U.S. government pumped hundreds of billions of dollars into the nation's biggest banks, taxpayers are starting to see a return on their generosity. While critics said they'd never see the money again, the U.S. has made a profit of about $4 billion from eight of the biggest banks that have fully repaid their debts to the government. The government has earned an additional $35 million from smaller banks that have paid back their obligations. The government is far from in the clear—The Treasury Department could still take a hit from guarantees on toxic mortgages, not to mention the bailouts of AIG, Fannie Mae and Freddie Mac, and GM and Chrysler.

The New York Times reports that the $4 million dollar figure does not include the roughly $35 million the government has earned from 14 smaller banks that have paid back their loans. The government bought shares in these and many other financial companies last fall, when sinking confidence among investors pushed down many bank stocks to just a few dollars a share. As the banks strengthened and became profitable, the government authorized them to pay back the preferred stock, which had been paying quarterly dividends since October.

But the real profit came as banks were permitted to buy back the so-called warrants, whose low fixed price provided a windfall for the government as the shares of the companies soared.

“Taxpayers should heave a sigh of relief that the investment in the banks protected them from even more catastrophic losses from more bank failures,” said Aswath Damodaran, a finance professor at the Stern School of Business at New York University.

Far be it from the cable media to report some positive news about TARP, the nearly year-old Troubled Asset Relief Program.

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