June 10th, 2009
04:34 PM ET
11 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. C


    June 10, 2009 05:27 pm at 5:27 pm |
  2. phoenix86

    I am sure that the Obama adminstration will find a way to direct this money back to the UAW.

    June 10, 2009 05:27 pm at 5:27 pm |
  3. Avg Joe

    This money wasn't part of the stimulus; it was part of the bailouts that were put in place to prevent the entire economic system from collapsing by a run on the banks. And yes, it was mostly put in place by Bush; not Obama, which only shows that even an incompetent administration can get some things right.

    Unbelievable how ignorant some "fiscal conservatives" are. Exactly the same arguments as they're using now, made the Great Depression. There are no serious economists who debate the notion that the stimulus that was finally put in place at that time, was what pulled the country out of it. And yet they'd do the same thing all over again...

    Fiscal responsibility should have started a long time ago when the economy was better, and does not include waging a very costly was and giving tax breaks only to the top 1% incomes.

    June 10, 2009 05:28 pm at 5:28 pm |
  4. Ummm

    Republicans are so dumb dude...of course in THEIR eyes this is called "socialism"...the most ridiculous thing i've ever heard...I guess it's NOT socialism when you give tax breaks (which is equivalent to MONEY idiots) to the wealthy while everyone else's is jacked up and we end up paying more which will end up where? guess? THE RICH'S pockets! I for one am tired of hearing rich people getting tax breaks while they're feasting on cavier and champagne and laughing at the rest of us because they've brainwashed the less fortunate in this country and have convinced them they have the right ideas for america! NOT! they're only interests are THEMSELVES!

    June 10, 2009 05:33 pm at 5:33 pm |
  5. Have fear Rev. Wright is here

    Another 2.7 billion for the leaches in society to soak up...

    June 10, 2009 05:33 pm at 5:33 pm |
  6. Al Bluengreenenbrownenburger

    Kept the bank system from collapsing, making a profit, and the conservatives are mad about it.

    You know what the Rage Repbulicans are really mad about? They are mad that they totally blew it when in power, seriously damaging America's economy, foreign policy affairs, and virtually everything else. They are also mad that Obama is very likely to successfully pull us out of this economic mess and rebuild America as a strong force for good in the world.

    After the Bush/Cheney/Rove/Limbaugh/Fox nightmare years, why don't conservatives have the good sense to realize everything they did and believed turned out to be completely wrong, that they should shut their mouths and open their minds?

    June 10, 2009 05:33 pm at 5:33 pm |
  7. The Federal Bank ... Yeah!

    What was the interest rate? I could care less about the dollar figure.

    What I want to know is was the Bush Administration smart enough not to give the banks a "sweetheart deal" when they 1st authorized the TARP money.

    I really wished that President Bush had let the banks fail. The government could have set up a simple merchant bank to buy the troubled assets and conduct banking business for a short while.

    This would have been the "free market" at work ... the bad ones fail ... and would have put pricing pressure on the remaining banks.

    If Visa & Mastercard were suddenly afraid that the government would be offering the public credit cards at 12% instead of 28%, they'd have changed their practices. Hell, let the government take only the best credit risks and leave the rest to the banks. That would teach 'em.

    June 10, 2009 05:39 pm at 5:39 pm |
  8. jimmy-ohio

    before anyone starts getting the extreme wing machines cranked up can we all admit that this is a start and MAYBE we should wait and see if it continues before we call it success or failure?

    June 10, 2009 05:39 pm at 5:39 pm |
  9. Chenna Benna

    Wow. I'm getting dizzy from all the spinning by the Republicans on here. The party of "No" said just that to the President and it seems that the course of actions the President is taking are beginning to pay off. Of course no credit given from Republicans to the President. Just keep saying "No." When the economy begins to pull around as everyone has been say, I'm sure the Republicans will be saying "No" again, as in "No, I can't believe it's working!"

    June 10, 2009 05:39 pm at 5:39 pm |
  10. Terry from Texas

    Banks are eager to repay their government loans so their CEOs can start collecting those obscene bonuses again. Also, they want to get started on the next bubble that will crash our economy in 2015 or 2020.

    June 10, 2009 05:41 pm at 5:41 pm |
  11. Matt

    Meanwhile, Obama payed a foreign company to buy an American company, and in turn shut down another bunch of American jobs.

    Thanks, Obama!

    June 10, 2009 05:47 pm at 5:47 pm |
  12. FactCheck

    You Republican wing-nuts should go and earn an education. Maybe then, you can begin to understand how the economy works.

    June 10, 2009 05:52 pm at 5:52 pm |
  13. oscar

    if obama had let the financial sector fail, the gop would still fault him...it's a no win situation. now that there is a profit (small...but it's only been 3 months!), they will complain that it isn't large enough, or that he didn't do enough. it's easy being an armchair quarter back isn't it, gop? if obama fails, gop will gloat, if he succeeds, they will diminish his success. lose – lose situation...so here is what i propose:
    simply cut off the gop (i mean, it is pretty much on it's way to being defunct at worst, marginalized and regional at best). as bush used to say, "either you're with us or against us." he can accomplish majority of his agenda with or without them...therefore, shut the out of the polical process if all they are doing is obstructing the president and misreprisenting him as an individual and a public officer. shame!

    June 10, 2009 05:53 pm at 5:53 pm |
  14. Brandon V in DFW


    President Bush started the TARP program because he thought it was best for the country. President Obama continued it becaue he thought it was best for the country.

    This is just the begining of banks returning funds from the TARP and bailouts so any profit is better than no profit.

    June 10, 2009 06:07 pm at 6:07 pm |
  15. Hammer

    Is that 2.7 billion anything like the 150,000 jobs saved so far or the 600,000 jobs to be saved this summer?

    June 10, 2009 06:10 pm at 6:10 pm |
  16. annie s

    Ahem, phoenix 86, thank you who?? Let's read it together and see if we can figure out who was President when these things happened:

    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.

    June 10, 2009 06:13 pm at 6:13 pm |
  17. David

    WOW! This is great news. And they haven't released the amount of interest America earned from loaning the banks money that's now being paid back. Finally our country is being run like a responsible business. Thank You President Obama!!!!

    June 10, 2009 06:16 pm at 6:16 pm |
  18. Dawn in Pa

    please start to pay down our debt..... that is a start.....

    June 10, 2009 06:17 pm at 6:17 pm |
  19. DAVE N CA

    looks like this money that will be paid back along with the interest will be shipped off to Europe for a down payment on aligning us with European policies..... of course there not going to broadcast this from the roof tops to give the American people transparency that was so vigorously promised to get all of the idiotic Americans to vote for "GOD"

    June 10, 2009 06:18 pm at 6:18 pm |
  20. Andrew, Buffalo NY

    To all you Obama supporters who are thinking this is great.... You can thank GW for it! As you may remember he passed TARP!! OOOOPPS!

    June 10, 2009 06:20 pm at 6:20 pm |
  21. Sniffit

    Enjoy your aneurisms GOPers.

    June 10, 2009 06:22 pm at 6:22 pm |
  22. Typical Republican

    Ah CRAP! The bail out that Obama is blamed for is EARNING money for the government, rather then LOSING money for investors. We told you it wasn't a good idea. It's EARNING money and PAYING for itself. That's a really bad thing!

    I know what we can do...we can say it was because republicans voted for it (even though it was only three of them that voted for it.....we'll just start lying now, like usual).

    THIS sucks! Obama is bad!

    June 10, 2009 06:26 pm at 6:26 pm |
  23. Charles

    Why do hard core Democrates and Republicans alike have to put their hatred spin on every article. There is plenty of blame to go around. And guess what, the blame is with both parties. I am amazed by how little the average American understands this whole program.

    Having said that, the TARP program scares the hell out of me. I hope it works, but I am not at all optomistic about it.

    June 10, 2009 06:40 pm at 6:40 pm |
  24. Mike

    I fail to see how this is a victory for Tax-payers. Has the 2.7 billion been distributed to us? No. Will it be distributed to us? Probably not, as long as the Federal Reserve has a say in it...

    June 10, 2009 06:41 pm at 6:41 pm |
  25. RNC countdown in 5,4,3,2,1....

    No group or person should EVER replace a SMART PRESIDENT in our White House.

    My fellow Americans, let's call this an American lesson learned...More to come...

    Thank you Mr. President

    June 10, 2009 06:42 pm at 6:42 pm |
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