Friday, December 3, 2010

Where'd Da Money Go, George?

The TARP, or Troubled Asset Relief Program, is also known as the Emergency Economic Stabilization Act of 2008, or Public Law 110-343, signed by George W. Bush on October 3, 2008, less than a month after the implosion of Merrill-Lynch and the resulting Crash of the Market. It allows the government to purchase or insure up to $700 Billion of "troubled assets", defined as
(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary [of the Treasury] determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

The banking sector screamed that this amounted to nationalization of the banking system, but that was never true. The government was supposed to be giving the banks money to purchase the bad loans and take the risk of the bad loans off their books, and on to the backs of the taxpayers.

Gimmie Dat Money!

This was the functional equivalent of FDR's 'Lend-Lease' policy to Britain -- the government gave the financial sector a fire hose. The Banksters would give it back; there was no time limit on returning the money. This assumes, of course, that the Banksters used the money for the reasons it had been given to them in the first place -- to stabilize their operations and allow them to begin lending money again.

You can already see where this is going, can't you?

Wikipedia which tells us that

The effects of the TARP have been widely debated ... For example, a review of investor presentations and conference calls by executives of some two dozen US-based banks by the New York Times found that "few [banks] cited lending as a priority. Further, an overwhelming majority saw the program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future." [Emphasis added] The article cited several bank chairmen as stating that they viewed the money as available for strategic acquisitions in the future rather than to increase lending to the private sector...

...The Senate Congressional Oversight Panel created to oversee the TARP concluded on January 9, 2009: "In particular, the Panel sees no evidence that the U.S. Treasury has used TARP funds to support the housing market by avoiding preventable foreclosures". The panel also concluded that "Although half the money has not yet been received by the banks, hundreds of billions of dollars have been injected into the marketplace with no demonstrable effects on lending."

... During 2008, companies that received $295 billion in bailout money had spent $114 million on lobbying and campaign contributions. Banks that received bailout money had compensated their top executives nearly $1.6 billion in 2007, including salaries, cash bonuses, stock options, and benefits including personal use of company jets and chauffeurs, home security, country club memberships, and professional money management... Graef Crystal, a former compensation consultant and author of "The Crystal Report on Executive Compensation," claimed that the limits on executive pay were "a joke" and that "they’re just allowing companies to defer compensation."


So Where Da Money?

So, there was a pool of almost $700 Billion dollars available to the financial sector under part (A) -- but part (B) meant the government could purchase "any other financial instrument" to "promote market stability". such as majority ownership in an automobile manufacturing company, say.

Pro Publica, launched as a Progressive, factually-based reporting site, provides a full list of all the recipients of TARP funds; you can see it here (found via Barry Ritzholz' The Big Picture). It will show you both who got what, and how much each recipient still has to return to the Treasury.

So, let's pick up our crayons with our soft mouth parts (Oh; sorry - you humans have hands) and do the math:

$607,822,512,238 was available.

(553,918,968,267) was disbursed to 938 recipients.

220,704,475,564 has been returned to the government;

(333,214,492,703) is still in the hands of recipients.

TARP was ostensibly created to purchase bad securities, stabilize their underlying mortgages, and prop up the housing sector of the economy -- homeowners might not fall into foreclosure in droves, and the investment of the large Real-Estate developers would be preserved. And there wouldn't be huge ripple effects through the rest of the economy. But the Banksters took the money, got fatter, and have Robo-Foreclosed on the homeowners anyway.

And this doesn't even begin to get into the Obama administration's $760-plus Billion-dollar Stability package, handed primarily to the Banksters in 2009; or the additional $1.3 Trillion in loans provided to the Banksters through the U.S. Treasury at practically zero interest.

That puts the amount of the burden we carry -- all to make sure that people like Little Lloyd Blankfein can travel between his five or six homes in safety and comfort -- at $2.4 Trillion Dollars.

That we know about.