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. DAVE N CA

    LIBERALS= "IDIOTS When the bill comes for your Universal Healthcare are you going to be willing to fork up your fair share? When the VAT tax is implemented are you going to not have a problem forking up another 25% on any and everything you purchase? Of course when spending your welfare check this will affect you.... Not your income tax since you are predominantly a lazy group who believes that you are all owed something..... GET A JOB and earn your own way... Oh wait, your president will send most private sector jobs over seas because he will make it impossible for them to stay here..... So much for the idea of giving 95% of Americans a tax break... but of course you all are enjoying your $36/week i guess that pays for your internet access or cable bill to keep you informed by the MSM who instead of reporting the news clearly are too busy getting on there knees in front of Obama..... What a waste your vote was.....

    June 10, 2009 06:44 pm at 6:44 pm |
  2. dennis

    The u.s.a is turning into a foreign country.

    June 10, 2009 06:45 pm at 6:45 pm |
  3. Coray

    I have one question here. The fed made 4.6 billion by buying up the US debt if I read this right. (Treasury bonds are issued to borrow money for the government to operate or print more money if I am not mistaken, If I am let me know!) The fed and the treasury are all part of the US Govt. , right? So it would seem to me that this money is just smoke and mirrors. It is money that doesn't exist, and your grandkids and kids will have to pay it back wether it is the treasury or the fed, so it would seem that they actually lost 1.9 Billion and are trying to fool people into believing they made money. Just a logical look at this regardless of political affialiation.

    June 10, 2009 06:45 pm at 6:45 pm |
  4. malclave

    $2.7 billion?

    Who cares? That's chump change under Obama.

    June 10, 2009 06:47 pm at 6:47 pm |
  5. MT

    Fact Check

    I'll see your education and raise you my masters degree in Accounting, minor in Economics. You sound like a UAW lobbyist?

    Until I see it on the balance sheet, with an astute well factored contra-asset figure (Allowance for Doubtful Accounts) from semi-solvent financial institutions IT DOES NOT EXIST.

    June 10, 2009 06:49 pm at 6:49 pm |
  6. Mike Dallas

    Good job President Obama, use the profit as a start to revamp health care in this country for the 46 million citizens without any.

    June 10, 2009 06:51 pm at 6:51 pm |
  7. ChicagoDB

    Mississippi Mike –
    Day in and day out, your comments prove that Mississippi is indeed the butthole of America.
    Keep up the good work. You are helping to turn 2010
    & 2012 into the beat down that was 2008.

    June 10, 2009 06:54 pm at 6:54 pm |
  8. Cynthia - Arkansas

    Would you people just be happy and not say ugly things about our President? Just once, be happy and let it go.

    God Bless you President Obama. Keep your chin up. There are millions of us that love you and are proud of you!

    June 10, 2009 06:54 pm at 6:54 pm |
  9. Typical Republican

    Ah Crap! Obama's bail out plan is making us money. This is TERRIBLE. The government is MAKING earnings on their investment rather then investors losing their BUTTS! This is HORRIBLE.

    Obama, the correct decisions he is making, are really bad. Since when do you want the government to 1) Save an important company and 2) Earn back some of the money spent doing it.

    I say NEVER. As a republican I think we should just fail as a nation rather then make wise decisions and succeed.

    June 10, 2009 06:57 pm at 6:57 pm |
  10. Michele

    TCM, I heard a report last night that showed 4 different REPUBLICAN Treasury heads using the same "saving or creating" phrase. This is not a Democratic phrase at all, nor is it new. How they figure it out, I have no idea! But then, I don't have a degree in economics, so I am willing to trust those who do, and when the government gets a return from some of the money, that is a good thing. But Republicans are forbidden by their Lords and Masters Rush and Hannity from admitting that Obama is doing anything good, aren't you?
    Meanwhile, the gun owners must be very proud of the latest shooting. In one week, you killed a doctor in a church, a soldier at a recruiting station, and now some tourists at a Jewish Museum. Great work. Keep riling up all the idiots in your party. Your approval rating should drop another 5 points.

    June 10, 2009 06:58 pm at 6:58 pm |
  11. Candy West Virginia

    Matt – why do you continuously lie? President Obama did not pay a foreign company to buy the auto company. Jesus, it's bad enough you republikcans stood by and let bush and the other repubs ruin this country but to lie against our President when he is trying to fix this country is disgusting.

    June 10, 2009 07:05 pm at 7:05 pm |
  12. Neutralizer

    Did Turbo Tim mention, banks who was returning TARP

    June 10, 2009 07:06 pm at 7:06 pm |
  13. Enlightened Voter

    Funny how you rethuglicans are actually spinning this into something negative but that sad fact is what return did bush ever ask for or get for all the money he gave away in abundance??? President Obama is proving to be brilliant!

    June 10, 2009 07:11 pm at 7:11 pm |
  14. annie for Palin

    To Fat Check – if education does for everyone what it has done for obama then we had all better take stupid pills! All it has done for him and his partners in crime is to make them criminal or terrorist or a lunatic ranting and raving phoney minister.

    June 10, 2009 07:17 pm at 7:17 pm |
  15. Proud DHS radical

    Taxpayers gain $2.7 billion dollars. Obama plans on giving GM another $30 billion which means we the taxpayers are still stuck for a lost of $27.3 billion dollars that is going down a black hole.

    June 10, 2009 07:21 pm at 7:21 pm |
  16. nota dem

    So you made some profit on my tax dollars so how will Obama spend it now, some type of trip for him and his family while businesses in Iowa are closing and more people get layed off. Obama is a lier and fraud as a leader.

    June 10, 2009 07:22 pm at 7:22 pm |
  17. joe smith

    but where is the report from Freddie Mac; this key report was to be out at the end of May,( thats' 2009 ), but a little rope streching exersize apparently has postponed this report, ( how convienent ), reminds me of the lost little black book the dc servicemaster misplaced; anyway, does anyone care about this, how about you CNN, got any investagative reporters on staff..

    June 10, 2009 07:40 pm at 7:40 pm |
  18. Ken

    The taxpayers didn't gain a penny, the government gained the money. By law that money paid back by the banks is required to pay down the debt, however, Obama and little Timmy Geihtner now plan on breaking the law and using that money to expand social programs.

    June 10, 2009 07:45 pm at 7:45 pm |
  19. Really!?

    that will help offset the trillions in additional deficit. I see tax increases in the future, and that translates into more expensive goods and service plus higher personal income taxes for the middle class and above. The bottom feeders who elected Obama will continue to pay nothing and suck up all federal benefit programs.

    June 10, 2009 07:55 pm at 7:55 pm |
  20. Willy Brown

    Smoke and mirrors CNN smoke and mirrors

    June 10, 2009 08:06 pm at 8:06 pm |
  21. leon pa

    yes we can

    June 10, 2009 08:11 pm at 8:11 pm |
  22. Larry

    After reading your post , it became that you are very good at self portraits

    June 10, 2009 08:14 pm at 8:14 pm |
  23. Kimberly

    OHHHH, so they are paying it bac k? Does thats good right. Or will the right wing loons complain about this too??? I cant WAIT to see...

    June 10, 2009 08:15 pm at 8:15 pm |
  24. Moderate Conservative

    Michigan Jim,
    The percentage return is not based on the total available TARP funding. It is more accurate to base it on the funds loaned to the 10 banks who are making the repayment.

    The calculation would appear to be 2.7B/63B ... approximately 1/20 .. 5 per cent for the quarter.

    The best performing mutual fund this quarter only provided a 3.5 per cent return (NBR.com).

    June 10, 2009 08:17 pm at 8:17 pm |
  25. Larry

    Hopefully, the list of EXTINCT species will soon include the, self-described "phisical conservative", a real conservative wouldn't have supported

    June 10, 2009 08:20 pm at 8:20 pm |
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