Saturday, January 20, 2018
Business

A scorecard on how the rest of the federal bailout beyond AIG has fared

The sale of a huge chunk of government-controlled shares of AIG raises a bigger question: Has the federal bailout of 2008 paid off? • It's still a work in progress. • The bailouts were set up to stabilize the economy and keep certain at-risk companies from going under, not to make money like traditional investments. • Still, many are reaping strong dividends for taxpayers, including parts of the often-derided Troubled Asset Relief Program, or TARP.

About $342 billion of the $411 billion doled out as part of various TARP initiatives has been paid back, according to a U.S. Treasury Department report last month. That's 83 percent, a number that should increase in the coming years.

"Overall, the government is now expected to at least break even on its financial stability programs overall and may realize a positive return," the Treasury Department says.

But that government analysis homes in on TARP. At least one other huge government bailout — the multibillion-dollar effort to shore up mortgage lenders Fannie Mae and Freddie Mac — may never be repaid in full.

The bank bailouts

What happened: Starting in 2008, during the Bush administration, five different programs were enacted to shore up the country's troubled banking industry. In addition to emergency lending to banks, the government also bought shares of banks.

Status: As of July 31, the Treasury had recovered more than $264 billion through repayments and other income. That's $19 billion more than the $245 billion originally invested. No taxpayer money has been invested in banks under TARP since the end of 2009. However, as of early May, about 343 mostly smaller institutions remained in the program. Many of them are still trying to repay their debt. If they do, that could add to the Treasury's bottom line. Government regulators, largely through the FDIC and the Federal Reserve, also extended billions of dollars in cash and guarantees to the megabanks beyond the direct TARP loans and equity investments.

Fannie Mae and Freddie Mac

What Happened: The Bush administration seized the two giant mortgage finance companies in 2008 amid fears they could collapse, severely stressing an already-shaky housing market.

Status: The companies have paid back only $45 billion of the $188 billion they received from taxpayers. Last month, the Treasury Department revamped the bailout dramatically. No longer would Fannie and Freddie make dividend payments; instead, any profits would go directly to the Treasury. Despite the change, the companies' future is still tenuous. At the end of the year, the Treasury Department's unlimited support to the lenders will cease. At that point, total bailout funding for Fannie Mae will be capped at $125 billion and bailout money for Freddie Mac will be capped at $149 billion.

Auto industry

What Happened: Fearing the collapse of the auto industry — and the 1 million jobs connected to it — the U.S. Treasury invested about $80 billion to prop up ailing automakers. Top targets: General Motors Co., the Chrysler Group and Ally Financial, formerly known as GMAC.

Status: The government is only halfway to getting back the $80 billion. The Treasury owns 32 percent of General Motors, down from an initial 60.8 percent, and has recovered about 50 percent of its initial investment in the automaker. Meanwhile, the government no longer has any stake in Chrysler, which is now controlled by Italian automaker Fiat. Chrysler paid back six years ahead of schedule, returning more than $11.2 billion of $12.5 billion committed to the company through principal repayments, interest and canceled commitments. The Treasury still owns 74 percent of Ally Financial, plus $5.9 billion worth of convertible preferred stock that would increase its ownership stake if converted to common stock. So far, the Treasury has earned back about one-third of its initial $17 billion investment in Ally.

Credit market programs

What Happened: Small businesses and consumers seeking loans in 2008 ran into a severe credit market freeze. The problem focused less on community banks than on secondary markets that were no longer willing to facilitate deals. Both Bush and Obama introduced several TARP-related programs geared toward bringing private capital back into the market.

Status: • The Term Asset-Backed Securities Loan Facility, or TALF, was launched by the Treasury and Federal Reserve to restart the asset-backed securitization markets, which provide credit to small businesses. As of the end of 2011, TALF loans totaled $9 billion and the government estimated that taxpayers would earn a positive return of $430 million eventually. TALF was closed to new lending two years ago.

• To stimulate small-business lending, the Treasury bought securities backing a portion of some small-business loans. The government backed 700 loans altogether and recovered $376 million, representing a gain of about $8 million for taxpayers on its original investment of $368 million.

• The purpose of the Public-Private Investment Program was to encourage private investors to buy troubled mortgage-backed securities. So far, the government has spent $7.4 billion and received back $3.5 billion in interest and other payments. The program is ongoing.

Times wires contributed to this report.

   
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