Yesterday, the Treasury Department announced that it’s allowing ten banks to repay $68 billion in TARP money. McClatchy added today that the federal government actually saw a profit on this $68 billion, albeit a small one:
In addition to returning the $68 billion, the 10 banks paid the government $1.8 billion in dividends on the preferred shares of stock the government owned. That translates to an annualized rate of return of about 4.64 percent on the $68 billion. In all, the government has received $4.5 billion from all bailout recipients, who’ve received $200 billion, for an annualized rate of return since Nov. 12, 2008, when the money was lent out, of 3.94 percent.
As Matthew Yglesias pointed out, this seems to show that “for all the complaining from both the right and the populist left about spending $700 billion on bailouts, the net fiscal cost of the $700 billion TARP program is likely to be dramatically lower.” However, CNBC’s crack economic team isn’t buying it, and spent a segment today discussing how the Treasury is clearly going to put the repaid TARP funds into a government slush fund to bail out “the Boston Globe” and “the guys that make Chia pets,” and thus taxpayers will never see the money again. Watch it:
CNBC contributor Steve Leisman provided a nice moment of sanity during the segment, reminding his co-contributor Stephen Moore that “you were the one arguing that the taxpayers would never see a dime from this, the banks would never pay it back, and now you want us to believe your next new warning?”
There are real questions about where the money repaid from TARP should go, and one of the options is having Treasury hold onto it in case of another economic free fall. This is what Herb Allison, who the Obama administration has tapped to run the program, thinks we should do. Other options include paying down debt or using the funds to aid smaller, community banks.
There is also some ambiguity about Treasury’s plan for winding down its interest in institutions like Citigroup and GMAC, from which there will likely be no repayment anytime soon. But CNBC couldn’t be bothered with a serious discussion, and decided that it would be more entertaining to laugh about the federal government buying Chia pets.
The Federal Reserve has also made $2.7 billion on its investments in banks and lenders in the first quarter of 2009.