June 10th, 2009
04:34 PM ET
5 years ago

Taxpayers gain $2.7B on bailout 'investment'

NEW YORK (CNNMoney.com) – The government bailout of banks, lenders, Bear Stearns and AIG brought in billions of dollars to the Federal Reserve in the first quarter of 2009.

In the first of a series of monthly reports on its $2.1 trillion balance sheet, the Fed said it earned a net $2.7 billion from January through March. Most of the gains stemmed from new lending facilities that the Fed instituted after the collapse of Lehman Brothers brought the nation's flow of credit to a halt in September.

The U.S. central bank said it took in $1.2 billion on interest in loans in its Term Auction Facility (TAF) and to troubled insurer AIG (AIG, Fortune 500). TAF, which the Fed began at the beginning of the recession in December 2007, lends short-term money to banks in exchange for toxic assets as collateral.

The Fed also made $2.1 billion on its Commercial Paper Funding Facility, in which the government buys up companies' short term debt in exchange for interest and a fee.

Treasury bonds, which performed well in the first three months of the year, made the Fed another $4.6 billion. The Fed began purchasing long-term Treasurys in March in an attempt to reduce bond yields and interest rates that are tied to them.

But the Fed lost a whopping $5.3 billion on assets it took hold of after the Bear Stearns and AIG bailouts. The vast majority ($4.9 billion worth) of the losses were AIG-related, as the central bank bought up nearly $50 billion worth of toxic assets in exchange for loans to the company.

Bailout opponents have voiced strong concern about the government taking hold of toxic assets, claming that the value will only continue to deteriorate over time losing the taxpayers billions of dollars. But the Fed has maintained that market improvements over the next months and year will help increase the value of its holdings, and it may be able to sell many of those assets for a gain.

The report is part of of a Fed effort to increase transparency about its finances and bailout efforts, especially as it ramped up its balance sheet by more than $1 trillion since September. The Fed said it will issue the report on the second Wednesday of each month.


Filed under: Economy • TARP
soundoff (98 Responses)
  1. Dan

    The Republican spin on this story:

    Another example of Obama screwing up the economy. The Fed only made $2.7 billion. If we were in charge, we would have made over $3 billion. How, you ask? Tax cuts.

    June 10, 2009 04:38 pm at 4:38 pm |
  2. Michigan Jim

    Wow - a 0.13% return for the quarter! Pretty good for the government. Of course, had that $2.7 trillion stayed in the private sector, we could have probably had a couple of million new jobs instead.

    June 10, 2009 04:39 pm at 4:39 pm |
  3. Fed Up

    What are the odds that Obama will give that $2.7B profit made possible by the taxpayers back to the taxpayers? (By taxpayer, I mean someone who actually pays real taxes). C'mon PrezBO, spread the wealth.

    June 10, 2009 04:40 pm at 4:40 pm |
  4. TCM

    well, I guess Obama will use that in the Paygo program to create those 600,000 new jobs in the next 100 days...oops...my bad, 99 days...better get crackin' Obama....

    This is a poor effort, CNN, to try and cover up the economic destruction that this administration is doing...2.7 billion...while it's a lot of money, it's peanuts to what this idiot's spending...

    This article falls in line with obama bragging about saving 150,000 jobs, while simultaneously (and unreported by MSM) the country lost 1,900,000 jobs....slight of hand..by the street performer.

    June 10, 2009 04:44 pm at 4:44 pm |
  5. Michael

    I'm sure the GOP will find a way to make this look like a bad thing. After all, for them to succeed in the next election Obama HAS to fail.

    June 10, 2009 04:45 pm at 4:45 pm |
  6. big papa

    You whining Obama-haters didn't get that kind of return on the Savings and Loan, Chrysler, or airlines bailouts...

    ...but the Obama Administration won't get credit...

    ...the haters will just say...

    ... "Its a cyclical profit realization that is inherent in doing business, that would've happened anyway"...

    June 10, 2009 04:46 pm at 4:46 pm |
  7. Dutch/Bad Newz, VA

    Did I just see the word profit? I can't wait to hear the GOP spin on this one.

    June 10, 2009 04:51 pm at 4:51 pm |
  8. skyhawkdriver

    Once again the dimwitocrats and their whitehouse duo of bert and ernie prove to us that they suffer from a severe case of cranial flatulance.

    June 10, 2009 04:53 pm at 4:53 pm |
  9. Dutch/Bad Newz, VA

    If only that lame duck republican President Bush would have done the same with his half of the TARP, we would be in alot better shape.

    June 10, 2009 04:53 pm at 4:53 pm |
  10. Paul from Phoenix

    Um, that money wasn't invested by the Obama administration. Bush and Paulson invested the chunk of money that returned the $2.7B.

    June 10, 2009 04:55 pm at 4:55 pm |
  11. GOP says If your a muslim your a terrorist. The End!

    It may be peanuts now TCM, buts it's also the first of many and it happened in less than 150 days.

    But as usual the people who didn't vote for Obama expect him to perform miracles. The rest of us so called "libs" just sit back and watch you scramble for an excuse to knock down this good bit of news.

    Good luck with that.

    June 10, 2009 04:56 pm at 4:56 pm |
  12. Ted Tartaglia

    It doesn't sound like a good return for the taxpayer. Several banks want to pay back TARP funds so they can escape from compensation oversight and other restrictions. If they want to escape regulations, they should be cut off from low interest federal reserve funds; in other words, no more 0% interest loans to banks.

    June 10, 2009 04:56 pm at 4:56 pm |
  13. Michigan Jim

    Actually, the taxpayers got a far better return on the Chrysler bailout. The 1979 federal loan guarantees guaranteed $1.5 billion in loans (sigh...back when a billion dollars meant something). Chrysler repaid the loans by 1983, along with $350 million in interest.

    June 10, 2009 04:57 pm at 4:57 pm |
  14. Dave

    GOPers will always find some trumped up negative spin on Obama good news. It's the only power the poor little has-been tyrants have anymore!

    June 10, 2009 04:57 pm at 4:57 pm |
  15. phoenix86

    THANK YOU GEORGE BUSH.

    Your investment is helping to stem the onslaught of Obama interest expenses on his wasteful spending programs.

    Thanks again.

    June 10, 2009 04:58 pm at 4:58 pm |
  16. dmjakers

    That Obama has some nerve getting the taxpayers a profit off the bailout investment money! That's unAmerican! (I have to say that or else Limbaugh will throw me out of the Republican party)

    June 10, 2009 05:00 pm at 5:00 pm |
  17. Tim

    BS, it's accounting gimmicks and doesn't take into account the lost opportunity costs. No point in trying to educate the uneducatable.

    June 10, 2009 05:00 pm at 5:00 pm |
  18. Abby

    Not to worry- The Party of No and their leaders (Rush, Bill-O etc) will spin this as a bad thing. That is, when they are not busy feeding the minds of intolerant extremists with hate.

    June 10, 2009 05:00 pm at 5:00 pm |
  19. Cynthia

    This is Socialism. Obama is ultimately going to have the Government own everything.

    June 10, 2009 05:02 pm at 5:02 pm |
  20. SOUTHERN HOTTIE

    YES WE CAN!

    OBAMA/BIDEN 2012

    June 10, 2009 05:04 pm at 5:04 pm |
  21. Mississippi Mike

    Wow, a 2.7 billion dollar return on a trillion dollar investment. That's the equivelant of a rounding error.

    June 10, 2009 05:06 pm at 5:06 pm |
  22. donttreadonme

    It is good news that Government made a tiny bit of money after all they have spent. This doesn’t change the fact that they should not be going down this road in the first place!

    The road to Socialism is paved with false positives and bravado.

    June 10, 2009 05:06 pm at 5:06 pm |
  23. Melissa

    Cynthia, who cares. Its saving our butts. Get over it.

    Good that we're making some money back. In only three months, the government has gained back half of what it lost in bailing out those companies. Thats a definate good thing. Possibly it will be paid off by the end of the next quarter, and we'll be on our way to paying off the national debt. Its about time.

    All it takes is patience.

    Anyone else notice how the country always seems to do better moneywise when the Democrats are in power? So much for the vaunted claims of fiscal responsibility. Most Republicans wouldn't know fiscal responsibility if it bit them on the butt.

    June 10, 2009 05:08 pm at 5:08 pm |
  24. GP NW Indiana

    Put it directly against the nation debt. Nowhere else

    June 10, 2009 05:11 pm at 5:11 pm |
  25. Melissa

    Wow, look at the point completely fly over the Republicans heads on this thread. Do you people miss the point on purpose? Or is it something mental that prevents you from thinking clearly?

    June 10, 2009 05:17 pm at 5:17 pm |
1 2 3 4