Forum Post: Most Banks Paid Back Bailouts with Interest?
Posted 12 years ago on Nov. 20, 2011, 5:04 p.m. EST by JoeTheFarmer
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I was researching the bailouts on the web and found several sites that claim the bailouts were actually loans to the banks that were paid back. The banks also had to pay quarterly dividends to the US treasury until they paid back their loans.
In total the US Treasury made $39.4 billion so far in interest and dividend payments for the loans. I also read that 90% of the loans have been paid back.
So was this really such a bad idea? I am not an economist but is sounds pretty good to me.
The banks paid back the government bailout loans with essentially interest-free money the banks received from the Fed. The banks were allowed (and are still allowed) to borrow from the Fed's discount window at near-zero short-term interest rates and then simply turn around and lend the money back to the government at much higher long-term risk-free interest rates. They lend the tax-free money to others are even higher interest rates and bag enormous profits. They were also allowed to value the worthless toxic assets on their books at maturity instead of fair value through bullshit accounting gimmicks. The government accepted the toxic assets as collateral at par value. Bottom line: the taxpayer bailout money that banks paid back are simply a smokescreen giving the impression that banks are sound when in reality they are effectively insolvent. Many of the banks raised capital by selling misguided investors newly issued, diluted stock and used the money they raised to pay back the government loans in part. Those investors are now holding the bag. Ask any Bank of America stock holder, who purchased the newly-issued shares two and a half years ago at prices much higher than they are now, what they think of the deal. The notion that the banks paid back the bailout loans with interest and, therefore, should be congratulated is a sick joke when one takes into account the big picture. Don't fixate on that misleading piece of information designed to make the banks look good when in reality they continue to receive gifts from the Fed who works for them, not us.
To understand this you only need to understand one thing.
The government borrowed money from banks that didn't have any money to fund the banks so the government could borrow the money.
Of course it was paid back, but that is not the point. For the RISK the taxpayer assumed, they were PAID NOTHING. Sadly, in 2008 our elected representatives demanded essentially nothing from "Big Finance" (Wall Street) in exchange for the risk the taxpayer was being asked to assume in the bailout, which was necessary to allow "Big Finance" (Wall Street) to survive.
Think about it this way for a moment. If you went to Hank Paulsen when he was CEO of Goldman Sachs and told him that, unless he invested in your struggling company, it would go bust, he would've demanded that he own a substantial portion of your company in exchange for bailing you out. Hank would not have loaned you money, he would've taken equity. In other words, HANK WOULD'VE OWNED A PIECE OF YOUR ASS FOR LIFE for bailing you out. Our elected representatives did not demand any equity or ownership on behalf of the taxpayer for bailing out "Big Finance" (Wall Street). For the risks we took, we, the taxpayer, should currently own the majority percentage of "Big Finance" (Wall Street) and should be sharing in the profits of these institutions on an ongoing basis, not just for a specified period of time.
So then, how do feel about Solyndra's loan guarantees ?
similar but, numerically, Solyndra is on quite a different scale. a rational person can't be furious about Solyndra and not be even more furious with "Big Finance" bailouts.
Really? All the same to me.... because it is the "private" investors that will get their money back and not the tax payer.... at least the Banks paid the money back. The American Taxpayer will be lucky if they get any of our money back.
And it's another example of DC just stepping all over the citizens... yet OWS refuses to acknowledge that Washington is the root of the problems
You know nothing of the movement if you believe that OWS has not acknowledged Washington. If you did, you'd realize how silly a matter that is to be hung up on.
Then please explain to me why every time I get into a discussion with an OWS member about focusing on Washington I get the same answer.... Wall St controls everything......it's Wall St that we have to change.
And how can you do that if you don't do something about Washington?
read items published by the movement. there are a million things to protest. just because you aren't protesting one thing doesn't mean you shouldn't protest another. protest is a political strategy.
OWS was formed under the premise of getting big money and corruption out of politics. How can you do that when you are protesting everything from fracking to stop and frisk? Protesting shouldn't be just an avenue to let off steam it should be the first step in actually making changes. And I don't see that even coming close to beginning.... Just as Washington has it's "special interest" groups so does OWS.
You're a fool of a business person if you think the taxpayer was compensated appropriately for the risks it took in bailing out Wall Street. Solyndra was a cakewalk as compared to Wall Street bailouts. As I wrote before, a rational person can't be furious about Solyndra and not be even more furious with "Big Finance" bailouts.
OWS is way beyond Washington and the "root" of the problems. You can spend your precious time debating "roots" or you can address injustices as you see them today and where you see them today.
Fine,.... now tell me who passed the laws that allow these injustices to happen? I have said this before... Wall St may have all the money but Washington holds all the cards. Wall St will not stop doing what it does, because it doesn't have to..... not as long as Congress keeps up their "good work".
And where did you get the idea I was a business person?
clearly you're not a business person. see my posts above about protesting and strategy.
I read your post...... I understand what you are saying. What I am trying to point out to you is that regardless Wall St or Solyndra.... DC is the fault of what has happened. They do nothing to protect the taxpayer.... so logically it is Washington that OWS should focus their attention on.
I disagree. Not necessarily is it logical that OWS should focus on Washington.
Well, we're all entitled to our opinions... good luck with that.
OWS refuses to acknowledge Washington because Obama is in the White House, just wait until Obama is gone and OWS will turn into Occupy Washington.
Hard to protest someone who, just a few years back, had you chanting hope change yes we can with tears rolling down their cheeks. they would feel as stupid as they umnn looked.
I don't think OWS is any more pleased with Obama than the rest of us are... And Presidents do not write or pass laws... Congress doers, so I don't think who the President is makes any difference.
You know nothing of the movement if you believe that OWS has not acknowledged Washington. If you did, you'd realize how silly a matter that is to be hung up on.
But $39.4 billion is not peanuts.
Actuyally the Treasury did take an equity share in many of the banks that were loaned money.
We should own the MAJORITY percentage of these institutions as they would not exist today if it weren't for the taxpayer. We, the taxpayer, should be sharing in the profits, whether the amount is 1bil or 10tril, of these institutions on an ongoing basis as any majority owner would. This is the deal "Big Finance" (Wall Street) would've cut if you were in their shoes and vice versa.
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fractional banking a great evil to make rich richer and poor poorer
|> Terrorism by Economic Collapse, debt bondage, money as debt on interest, etc > http://terrorismbreedsterrorism.wordpress.com/terrorism-topics/terrorism-by-economic-collapse/
|>Derivatives ‘Mother of All Bubbles’ exploding > http://inlightofrecentevents.wordpress.com/2011/10/14/derivatives-%E2%80%98mother-of-all-bubbles%E2%80%99-exploding/
|> Super rich 1% vs 99 %; Terrorism Cycle: Guillotines: Occupy “ALL” streets > http://terrorismbreedsterrorism.wordpress.com/super-rich-1-vs-99-terrorism-cycle-guillotines-occupy-all-streets/
and See SUPER COMMITTEE BIG BANK ROBBERY and “this sucker” going down
http://abusalmandeyauddeeneberle.wordpress.com/super-committee-big-bank-robbery-and-this-sucker-going-down/ Terrorism by Economic Collapse, debt bondage, money as debt on interest, etc http://terrorismbreedsterrorism.wordpress.com/terr...
It's misrepresented. Not too long ago, Congress required that the Federal Reserve provide more transparency of who it was giving money to and discovered that the banks that had paid back their loans, had done so by getting new secret loans from the Fed.
--David Haggith http://thegreatrecession.info/blog
We need more transparancy into the Fed. What we need is an audit of thier books.
I agree!
AIG sold credit swaps. Speculators also bought credit defaults. Basically...others bought insurance your car, home, ass...etc. to cover in case of collapse...of which they did..all backed by subprime mortgages. In 2004 they lifted leverage on the banks...which was INSANE. This meant they could wreck more havoc. People were borrowing like, 99.3% of home loans sinfully rated AAA..at this rate, they could NEVER afford to pay it all back. They have, is and always will be frauds. Morgan Stanley knew those cdo's were crap!! Bush signed a 700 billion bailout for AIG, which did nothing for people yet EVERYTHING for the big wankers hence foreclosures, the financial collapse which effects everyone globally...hence OWS.
This was all done in the name of getting poor folks into houses. The idea was good but the implementation was bad. Chenges to the rules were changes made to the Community Reinvestment Act.
Ron Pall warned of this five years before it happened. http://www.youtube.com/watch?v=Tn0EApd5wgw&t=1m39s
Most called him a nut case.
October, 2008
Senator Chris Dodd comments about the bank bailouts and what he was going to do if the loan situation didn’t improve. [*] “If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”
(Yep, I think this quote's a keeper)
Reference [*] http://www.nytimes.com/2008/10/25/business/25nocera.html?pagewanted=all
Do you find it interesting the Chris Dodd saw this after the fact but Ron.Paul saw it years before the collapse?
http://www.youtube.com/watch?v=Tn0EApd5wgw&t=1m39s
I do.
That's the housing bubble, but yes. Paul saw it coming, as did I (I'm not an economist either).
Your topic asks if the bank bailouts were a good idea. Sure, it's a great idea if you're a BANK.
Let's say there's a starving family with multiple children and we bailed them out with food. The parents ate it all in front of their starving children. We assumed they would feed their children. Was this a good idea?
Where the money come from?
they paid it back but the problem is the american public got sold out so they could get their risky investments covered. they caused the problem by lobbying for less regulation and see what it caused. they should have taken that money and loaned it out all right but they should have done a variable interest rate like they do everyone. charge them a low interest rate for the first payment then inflated the interest rate to like 25% and kept it going up. that way they would see that the risky loans with that type of interest is hard to pay back.
How did the public get sold out if they paid the money back?
they manipulated the system to cause this. its like betting on a fight thats rigged. they bet agianst the fighter to win but if he ends up winning what happens. the bookies who got the fight setup are looking to the boxer as to why he didnt take the fall. same thing here. they rigged the system so it would look like it was a great investment and then bet a ton of money agianst it. so when it failed they got paid dollar for dollar on it. american tax payers shouldnt be responsible to cover the losses. look into aig and how goldman got paid for betting agianst all these toxic investments.
If I came to you with a gun pointed at your head and told you to invest in my company to save it from going bust, then would you be happy with you just getting your money back at some later date?
OK that explains it, I did not know that guns were involved.
Why did I not hear about the folks with guns on the news.
"The global economy will collapse if you don't bail us out" - sound familiar?
you come atme with a gun best be looking out for my pit bull. while he has your attention id have a 45 long colt pointed at your head with a 410 shotgun shell in it. i cover my ass which is what they should have done. but they didnt thats why they had to ask the government to bail them out.
...and our elected representatives gave them the farm for free.
i agree. they said take what you want cause we know you are to big to fail. what about us the people. are we not to big to fail?
I know real estate companies work with the banks. Quite often they will help finance those who are lower income which initially seems like a good idea, but knowing they WILL foreclose eventually, then put the property back out on the market after the utility hook up has been paid by the ones being kicked out, and resell at a higher price, and the cycle continues.
Some real estate companies will advertize a certain way to attract buyers only to later go back on how they promoted their land and the environment. An example is powers real estate in mobile alabama, they advertize as "peaceful country living with wildlife and deer" only to log the properties after some people have bought it for that and have settled in. Then paul powers will build huge trailer parks instead of nice buffered areas for a nice cozey community. Much of the wild life is killed or run off as a result, and those who now owe the bank are stuck without their peace and quiet in a forestry setting, but in a "trailer hood" This needs to be stopped ! Contact..... paul powers. Go down to hyw 45 off of old citronelle highway in chunchula a mile north of arden rd. Take left, take another left at private lane, go to back, and watch the destroyer of forest at work, (251) 342-0600 3933 Moffett Rd, Mobile, AL 36618, Home in baldwin county in fairhope.
My post was not on lending practices it was on the bail outs. As i read that they were paid back with interest and divident I am not sure it was a bad idea to bail them out.
As for Powers Real estate, that is a different subject.
The taxpayer was not compensated in any way commensurate with the risk they took to bailout "Big Finance" (Wall street).
$39 Billion is not peanuts
It is peanuts when compared to the risk we took and that's what you and the general public doesn't understand. (and that's what "Big Finance" (Wall Street) doesn't want you to understand - the concept of a risk-adjusted return )
Actually while we were waiting for the payback we held an equity share an most of the banks. Some people were upset because they did not like the idea of the government owning the banks but we did until they paid back the money.
Many economists claim risk of not lending the money would have been worse. I am not an economist.
We should STILL own an equity share and be participating in the profits. That's what any rational business person would've demanded. Your alternative is for us to give bankers whatever they want because their lending is paramount. I disagree. That's not capitalism. We can find others to lend and if, for a period of time, it has to be nationalized banks owned by the taxpayer then so be it. They succesfully scared the crap out of people by using the term "Nationalization" and while everyone was shitting their pants, they made the deal of a century with our elected representatives. You want to rip off the American people? Then you scare them.
To be honest I don't believe the government should bail any corporation or person out. I believe that if someone screws up they should fail. If you lend to people that cannot pay you back you should go out of business.
I don't believe they should subsidize any industry either. I believe if you have a good product like geothermal energy you can succeed without a subsidy. If you have a bad idea like ethanol you will never get out of the gate.
I was just surprised when I started reading into it that 99% of the money had been paid back with interest.
our elected representatives had to at least get the money back with some interest. That is not the issue. We, the taxpayer, took the most massive financial risk in history and we received next to 0% interest for taking the risk. You would never get that deal from Wall Street if you were in their shoes. They would OWN you for as long as you are in business for bailing you out.
No they haven't they are still in debt and often have less money on hand then there debt? The banks are going to crumble if change don't happen. The only difference is the taxpayer isn't going To bail them out again. The interest rates are killing banks too.
I am not sure you are talking about the same thing I am. I was talking about banks paying back the TARP loans to the US Treasury. What I have found on many web sites is that they have and with interest.
Whether or not a specific bank is solvent is a seperate issue.
How can the interest rates be killing the banks? It's below 1%.
Right - they can borrow from the Federal Reserve at virtually zero, so anything they make on what they lend is gravy.
Yeah good point
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They still should have been allowed to fail. It would have put us in a depression but we would have come out much stronger.