Treasury has profited from big bank bailouts

April 27, 2010 03:40

At a time when both parties are competing to crack down the hardest on Wall Street banks, it might come as a surprise to know that the Treasury has been making a tidy profit on most of the government’s Wall Street rescue operations.

By Patrice Hill at Washington times

What few in Congress are disclosing is that the government’s non-bank rescues have become the biggest drain on taxpayers, including the burgeoning bailouts of mortgage giants Fannie Mae and Freddie Mac, insurance giant American International Group, and Detroit’s General Motors and Chrysler.

All but one of the megabanks that have raised populist ire — including Goldman Sachs, JP Morgan Chase and Bank of America — repaid the government bailout funds long ago, along with interest and dividends that made the deals profitable for the Treasury. Citigroup is the only major bank that has not repaid in full, though it has announced plans to do so.

While many smaller banks still have not repaid their government assistance, industry lobbyists say the much-maligned Troubled Asset Relief Program has proved to be mostly a big win for taxpayers and the economy.

“Two-thirds of the TARP investment from banks has already been repaid with a large profit to the taxpayer,” said Steve Bartlett, president of the Financial Services Roundtable. “TARP was a positive boost to the economy and the government, and taxpayers are seeing a positive return on their investment.”

The Federal Reserve reported last week that it had transferred a record $47.4 billion in profits to the Treasury in 2009 from its Wall Street rescue operations — up 50 percent from 2008.

About half of that came from interest that the central bank earned on Fannie Mae and Freddie Mac mortgage bonds it purchased in the past year to support the housing market and keep 30-year mortgage rates near record lows.


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