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Fri Aug 24, 2012, 10:46 AM

 

Fed says taxpayers earned $17.7B from AIG bailout

Source: Chicago Tribune

The Federal Reserve said taxpayers ended up earning $17.7 billion from the central bank's role in bailing out insurance giant American International Group Inc.

On Thursday, the Federal Reserve Bank of New York, the investment management arm of the Fed, sold the last of the asset-backed securities it acquired in the multi-step bailout of AIG, which the central bank engineered in 2008 with the Treasury Department.

The government pledged more than $182 billion to AIG in exchange for a 92% ownership stake as it stepped in to keep the company from filing for bankruptcy and possibly causing a global meltdown in financial markets.

Read more: http://www.chicagotribune.com/business/breaking/chi-fed-aig-bailout-0824,0,3413873.story



Good job, Bernanke. Now enforce the new financial regs.

13 replies, 3402 views

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Response to banned from Kos (Original post)

Fri Aug 24, 2012, 10:50 AM

1. So, when is my tax rebate check coming?

The "taxpayer's" earned $17.7 billion?

Bunk.

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Response to earthside (Reply #1)

Fri Aug 24, 2012, 10:52 AM

2. The money goes into the general fund

 

and reduces the deficit.

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Response to banned from Kos (Reply #2)

Fri Aug 24, 2012, 11:24 AM

7. Yeah, "reduces the deficit" -- Citi CEO Vikram Pandit's deficit



http://www.businessinsider.com/citi-paid-vikram-pandit-149-million-while-the-bank-received-144-million-in-tax-benefits-2012-8

Julia La Roche | Aug. 16, 2012, 1:24 PM

Study Blasts Citi For Paying Vikram Pandit $14.9 Million In 2011 While The Bank Received A $144 Million Tax Refund

Citigroup's chief executive was called out in a new study by the left-leaning Institute for Policy Studies about being paid more by the bank last year than the firm paid in U.S. federal taxes. (From the study):



Four years after the bailout that saved the firm from ruin, Citigroup and CEO Vikram Pandit are still living off taxpayer largesse. The firm, now profitable again, obtained a $144 million tax refund last year, thanks to some spectacular preferential tax treatment.

Citi, of course, owes its very existence to the massive bailout the bank received in 2008. According to the TARP Congressional Oversight Panel, the firm gleaned more government bailout subsidies than any other bank. Its haul totaled nearly half a trillion dollars in assistance through TARP, FDIC, and Fed liquidity programs.14

Pandit, after receiving $38.2 million in 2008 compensation, famously agreed to accept a mere $1 in salary until the troubled firm returned to profitability. But then the firm offered him $14.9 million for 2011 and shareholders, angered by the firmís dismal stock performance, rebelled. In April 2012, 55 percent of shareholders voted to reject Panditís outsized pay package. As of July, Citi's board of directors still hadnít revealed whether this nonbinding shareholder vote will trim Panditís pay package.


A Citi spokeswoman acknowledged to Reuters that the bank did not pay U.S. federal income tax in 2011 because of losses from 2008 and 2009.

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Response to brentspeak (Reply #7)

Fri Aug 24, 2012, 11:37 AM

9. This thread is about AIG, not Citi.

 

And Citi repaid its loans from TARP and the Fed.

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Response to banned from Kos (Reply #9)

Fri Aug 24, 2012, 11:50 AM

10. You claimed that the "earned" money will "reduce the deficit"

Last edited Fri Aug 24, 2012, 12:27 PM - Edit history (2)

But the article I cited shows that your claim is demonstrably false; the money is merely recycled back into expenditures -- such as providing mega-million dollar tax refunds for the entities that caused the mess to begin with.

BTW - has Citi paid back to taxpayers a portion of the $7 trillion in lost household equity which it played a large role in destroying?

http://www.allgov.com/news/where-is-the-money-going/more-than-half-of-americans-home-equity-lost-in-last-6-years?news=843897

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Response to banned from Kos (Original post)

Fri Aug 24, 2012, 11:03 AM

3. This number only deals with the asset-backed securities, no profit yet

Taxpayers still own 53% of AIG. Article states that there could be a profit of $15.1 billion NOT counting subsidies given to AIG since then.
This isn't good news yet.

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Response to Progressive dog (Reply #3)

Fri Aug 24, 2012, 11:15 AM

6. "did not take into account the government's cost to subsidize AIG since 2008..."

"The GAO's projection did not take into account the government's cost to subsidize AIG since 2008, which the agency did not calculate" - which is a different thing than "subsidies given". I'd imagine they are talking about the administrative costs to the agency and perhaps the costs of interest-not-earned, or profit they could have made with the same money invested more traditionally.

Any way you spin it, this is a big relief; the last of those "toxic" securities are off taxpayer's hands at a profit. The risk of loss was huge - as it was in the automaker bailouts - but it was well-managed and brought in on the positive side of break-even. What's left is the stock in the company, which also looks to be going well - up 46% this year, and in the process of being sold.

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Response to banned from Kos (Original post)

Fri Aug 24, 2012, 11:03 AM

4. Having sold the last of the asset-backed securities

does the US goverment remain the beneficial owner of AIG ?

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Response to banned from Kos (Original post)

Fri Aug 24, 2012, 11:06 AM

5. Gee, that really, really makes for the vanished $7 TRILLION in homeowner equity

(read: "retirement nest eggs" and "personal savings") caused by the very same bailed-out Wall St. institutions who rely on flunkies to trumpet the alleged TARP taxpayer "earnings" to the gullible public.



http://www.allgov.com/news/where-is-the-money-going/more-than-half-of-americans-home-equity-lost-in-last-6-years?news=843897

More than Half of Americansí Home Equity Lost in Last 6 Years

Shortly after the New Year began, Federal Reserve Chairman Ben Bernanke sent a sobering, if not alarming, report to Congress on the state of the U.S. housing market.

Right off the bat, Bernanke told lawmakers in the first paragraph of the report just how devastating the financial crisis had been for homeowners. From early 2006, when housing prices peaked, until last year, more than $7 trillion in home equity (property value minus mortgage) was lost, representing more than half of the total that existed six years ago. At least one out of four homeowners has a mortgage that is greater than the value of their home, according to data compiled by Zillow.

One is the most extreme statistics provided by the Federal Reserve is the dramatic drop in the ratio of home equity to disposable personal income (income minus taxes), which fell to 55%, by far the worst level since such figures were first calculated in 1950.


When American families are savoring a delicious meal of dog food for dinner, they can be comforted to know that the government made a few extra bucks...that immediately got turned into tax refunds for CEO's (including Citigroup's): http://articles.chicagotribune.com/2012-08-15/business/sns-rt-us-tax-ceobre87f04o-20120815_1_tax-refund-federal-taxes-tax-bills

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Response to brentspeak (Reply #5)

Fri Aug 24, 2012, 11:35 AM

8. AIG didn't cause the housing bubble. In fact they insured MBS (stupidly)

 

and suffered from that.

The shareholders lost most of their equity.

Bubbles happen - like the NASDAQ bubble of 1999-2000.

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Response to banned from Kos (Reply #8)

Fri Aug 24, 2012, 12:24 PM

11. Oh, yeah -- AIG merely sold phony protection that beefed up the entire bubble financing

Other than that, AIG and the CDS's it peddled played no role whatsoever.

http://www.econbrowser.com/archives/2009/03/moral_hazard_an.html



banned from kos: "Bubbles happen - like the NASDAQ bubble of 1999-2000."

If you can locate a single passage within the The Financial Crisis Inquiry Report that declared the housing bubble as something that "just happened", you should be allowed back on Daily Kos.



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Response to brentspeak (Reply #5)

Fri Aug 24, 2012, 01:09 PM

12. This is speaking more of the loss in the value of homes

A large part of this loss is that the housing prices were incredibly high and were pushed up by the housing bubble whose bursting caused the 2008 collapse. The values were inflated far beyond what they should have been because of the way that derivatives of housing mortgages were used as the fuel for the huge gain in financial assets. The values of houses increased far too fast during the late 1990s and especially during the 2000s - accelerated by Bush SEC chair allowing bank leverage to go from 1:12 to 1:44.

For the innocent owners of homes, that loss in value is very real. If you knew that the value of your house was $500,000 because that is what comparable houses were selling for in 2007 and made your financial plans based on that - you genuinely lost money if you sold it after 2008 or still own it. That the amount was inflated by speculation does not make you less unhappy that it is now significantly less. For those who bought their homes in the 1980s or 1990s, what they lost was more a perception that they were wealthier than they really were. Their home is likely still worth more than they paid and any home they would buy to replace it has also decreased in value - in fact, if they bought then and are buying up, they might still have a net gain if the house they buy lost more than they did. The ones really hurt are those now underwater because they owe more than the value of the home. These are people who bought their house near the peak. All the equity they put in is gone - they are the big losers.

However, for other forms of wealth - including stocks and 401ks, if you did not pull your money out during the years it was lower, the value is now around what it was before the crash. Realize that means that those assets had near zero growth in 4 years. Then remember that financial plans considered say a 4% annual rate of return a conservative assumption. This means that many people - even those fortunate enough not to have needed to liquidate their holdings between 2008 and 2010 - are not where they thought they would be in terms of saving for retirement.

Here, the blame should be on the government agencies - the SEC especially - that rather than regulating the market, opted to use speculation to juice the economy in early 2004 when they increased the leverage rates. (note the suspicious timing - Bush needed the economy to be good enough for enough people to make that issue - where the Democrats were then more trusted - not as important a voting issue. This does not excuse the banks - or AIG for their irresponsible actions where they completely underestimated the potential downside - if the housing market collapsed throughout the country - not only causing foreclosures and the pain they cause but the collapse of the value of derivatives that could have taken down all the major banks - including those who "insured" themselves with AIG's credit swaps, that AIG could not pay when they all failed at near the same time.

All the above speaks to the more fortunate - those who have savings and those who own homes that they bought before the speculative bubble inflated the prices. The other cost to the collapse of the economy was the hundreds of millions of jobs lost as sector after sector of the economy either slowed down or failed.

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Response to banned from Kos (Original post)

Fri Aug 24, 2012, 02:41 PM

13. The chocolate ration has been increased!

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