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Robert Bennett: A happier ending than I anticipated, AIG pays back TARP money, 17 billion in interest

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  • PM64 Orem, UT
    Feb. 15, 2014 1:26 a.m.

    I'm VERY glad that Bennett was taken out, since he was originally elected claiming that the three-term senator he ran against had been in Washington too long, while promising that if elected he would serve only two terms.

    Once he arrived, Bennett's ego grew to the point that he felt he was too valuable for Utah to lose. He broke his promise, and we finally tossed the liar out in the convention when he was demanding we elect him to a FOURTH term!

    We replaced him with one of the most conservative senators elected in decades. Mike Lee is one of the main faces and voices of the Tea Party and I'm very proud to have him represent Utah.

    Saying that TARP (and the bailout guarantee it provides the TBTF banks) was a good idea is like the old saying "So other than that, how was the play Mrs. Lincoln?" The TBTF banks should have been broken up, and Glass-Stegall should have been reinstated. There's no reason that Goldman Sachs etc. should be considered commercial banks and given access to the Fed's discount window. TARP set the foundation for the next financial meltdown.

  • Frank iCaucus Pleasant Grove, UT
    Dec. 18, 2012 1:31 p.m.

    There are only Two major problems with the rosy scenario presented in this incomplete headline:

    1) The money that Bailout banks "pay back" to the government comes predominantly from the government. In other words, we pay them to pay us back.

    Here's how it works: By keeping overnight lending rates between 0.00% and 0.25%, banks can borrow at next to nothing and buy risk-free U.S. Treasury securities that yield a lot more than their financing costs. The result is a "positive interest rate spread" which is the basis for banks revenues and profits.

    Additionally, banks borrow more money by using their Treasury securities as collateral for overnight and "term" loans. Then they use the cash they borrow to buy more Treasuries. They do this over and over again to leverage themselves, make "profits"; and "pay back" their TARP loans.

    2) The total bailout cost, even after AIG "paid back everything in full with interest&"; is currently still $155.8 billion in the red as of Dec 14th, which you can see at the ProPublica bailout tracking scorecards

  • lost in DC West Jordan, UT
    Dec. 18, 2012 12:57 p.m.

    Frank iCaucus,
    How did you get your URL past the DN censors?

    treasuries yield little more than the 25 bp fed funds rate you reference. Even if they did, the treasury would be paying on those bonds, whether the banks or China and Japan bought them.

    I have not checked it lately, but have you looked at the SIGTARP report to congress? It gives the official outlook for which TARP programs are profitable and which are not. The loses from TARP come from the housing and auto bailouts, not the bank bailouts.

  • RedShirt USS Enterprise, UT
    Dec. 18, 2012 8:59 a.m.

    To "Mister J" actually it wasn't the stock brokers that got us into this mess.

    It was the politicians over the past 80 years that have built up the institutions that created this mess. Politicians created Frannie Mae with the specific intent to make mortgages available to people with marginally bad credit. This slowly expanded through years until Carter and Clinton used it to force banks into making loans to people with bad credit.

    What you and your ilk fail to recognize is that the banks were following the regulations that were given to them by the Politicians. Prior to all of the rules, there were very few sub-prime loans. The more involved the politicians have become, the greater the quantity of sub-prime loans.

    But lets not forget that 3 months before Freddie and Fannie made it public that they were in serious trouble, that the Politicians said that everything was fine.

    It has only been since the government backed off all of their rules that the banks have been able to issue fewer sub-prime loans.

  • samhill Salt Lake City, UT
    Dec. 17, 2012 9:52 p.m.

    "If we exclude money given to the auto companies, TARP has been a money maker for the government."

    --------------

    Hmmmm. That's a very interesting (and revealing) sentence, if just a bit ambiguous.

    Is the bottom line of that sentence that TARP has NOT been a "money maker for the government" if the "money given to the auto companies" is included? What that basically tells me that if we were to be -honest- and include the money given to "bail out" the unions as well as the banks. Then we're back in the red.

    It is also interesting to note that it is the money given to the leftist unions (let's be honest about why the auto companies needed to be "bailed out") rather than the "evil", "dastardly" banks and other financial institutions who still owe us money.

    There's many a lesson to be learned here.

  • Mister J Salt Lake City, UT
    Dec. 17, 2012 9:27 p.m.

    re: RedShirt "If I want somebody to invest my money for me, I will call an stock broker, not a politician."

    Wasn't listening to Stockbrockers that got us into the TARP mess to begin with?

    p.s. Kudos to Lds liberal for the Monty Python

  • Citizen John Doe Orem, UT
    Dec. 17, 2012 8:44 p.m.

    Senator Bennett, over the years I have come to appreciate you more and more. I was one of the few who felt very similar to you about the TARP from the beginning on. I was more than stunned when you were "burned by [your] own village idiots" as someone mentioned previously.

    I consider myself an ultra-conservative fiscally, yet since 2008, I've espoused an idea that most conservatives have yet to consider, let alone embrace. That is that if the smart money is buying at the bottom of a cycle and selling at the top, why shouldn't the government step in at the bottom of the very worst crises, in a win-win situation...i.e. getting preferred stock and rock bottom prices AND stabilizing the markets at the same time! A no-brainer I say. We could pay down a very nice chunk of the national debt next time around if we did it right. Of course that is the danger, that a market approach is used rather than a socialistic bigger government approach.

  • Florwood American Fork, UT
    Dec. 17, 2012 3:36 p.m.

    Your vote for TARP was a key talking point for those who voted against you. Sorry for the premature judgement.

  • Prodicus Provo, UT
    Dec. 17, 2012 3:29 p.m.

    @Redshirt- Does it matter? Of course the truth matters.

    You're stubbornly refusing to acknowledge the truth about TARP and you're absurdly blaming Bennett and others for unrelated bailouts which they opposed.

    TARP was a success. Not perfect, but a success. That some other unrelated government programs have wasted taxpayer dollars (not a surprise to anyone) doesn't change that fact in the slightest.

  • UtahBlueDevil Durham, NC
    Dec. 17, 2012 2:25 p.m.

    @ Blue... lets not to factor in forget World War II in which the economic failure also was a huge lever in Hitler coming to power promising to get Germany out of its economic malaise. Statements like we should have allowed a world wide banking collapse are really quit frightening in that it indicates a fundamental lack of understanding how the credit markets work, and how the FDIC would have had to cover all those defunct accounts.

    Just the failure of Bank of America would have cost the tax payers more money to cover than the entire cost of TARP and associated programs. The one report I read from the fed was about 3 trillion usd to cover the cost of just a single major bank failure... and this would have been much more than one bank.

    And to that all M&A plus startup lending would have been wiped out, short term credit - airlines would have stopped flying in days - The implications are far wider and scarier than anything the worst FoxNews could have made up.

    I am truly grateful some understood the risks, and held their noses as they did the right thing.

  • RedShirt USS Enterprise, UT
    Dec. 17, 2012 2:02 p.m.

    To "Prodicus" does it matter who owes the $200 billion? Isn't a loss still a loss?

    Just because you owe your parents $20000, does not mean that you don't have any debt.

    If anything this speaks even more of the incompetence of government. The lending banks they set up are so incompetent at their job that after 4 years they have yet to do what most of the private banks have done.

  • rick122948 boise, id
    Dec. 17, 2012 1:53 p.m.

    @goatesnotes
    You are missing some key elements to the debt crisis, the wars Bush got us into in order to vindicate his fathers not going after Sadaam when the troops were there. When he was elected I told my son to watch and see if he didn't find some excuse valid or not to take us back into Iraq. Trillions of dollars a month spent to further a wrong policy Obama was left with. So look at the big picture instead of pecking at the edges.

  • ManInTheMiddle SANDY, UT
    Dec. 17, 2012 1:45 p.m.

    TARP was a bailout and Bennett knows it. The deals that our government officials gave these banks and insurance companies were WAY TOO GENEROUS. They had driven themselves into the ground and our economy with them. So when we parachuted in with billions of taxpayer dollars (and these taxpayer are our kids not us) why didn't we get a better deal? These companies had no other alternatives, so why didn't we fire all of the boards, or at least retain the right to do so? Why didn't we retain the right to veto bonuses and salaries? Why didn't we get more warrants? Why didn't the bond holders have to take a haircut. Why were the interest rates so favorable? It's all so disgusting.

    The deals given to these companies allowed taxpayers to pay for the mistakes of the companies. This is not capitalism, it's cronyism and will prove to be the ruin of our country.

  • atl134 Salt Lake City, UT
    Dec. 17, 2012 1:40 p.m.

    Well the people who want no more bailouts and think TARP set a bad precedent should want us to get rid of too-big-to-fail by making sure banks are no longer that big. So how about reinstating the regulations we had in place for half a century that kept them at bay (Glass-Steagall)? How about some good old-fashioned trust-busting a la Teddy Roosevelt? We won't need any more bailouts if banks aren't gigantic enough that their failure would significantly harm the economy.

  • Prodicus Provo, UT
    Dec. 17, 2012 1:18 p.m.

    @RedShirt, you have just succeeded in proving Bennett right about opposition to TARP being more often based on misconceptions than on reality. If you go back and actually read the CNN piece you refer to, it will tell you that the billions that are still owed are mostly from the Freddie Mae/Freddie Mac bailout, with the rest of the shortfall coming from the auto bailout. Bennett opposed both of those bailouts, neither of which has anything to do with TARP.

    It's true that some institutions tanked anyway (e.g. CIT), causing some TARP investments to be written off as a loss, and some are still in the process of repaying their TARP loans (e.g. Zions Bank). But any good investment involves some risk and the facts unquestionably show that TARP turned a profit.

  • Prodicus Provo, UT
    Dec. 17, 2012 12:52 p.m.

    @Blue- well put, but remember, it wasn't the majority of Utah Republicans who kicked Bennett out, it was extremists showing up in vastly disproportionate numbers at the caucuses (with out-of-state organizations spending hundreds of thousands of dollars to try to achieve that result). Polling showed that if he'd made it to a primary election he likely would have won.

    So when you say "let the Tea Party jerk you around," the ways mainstream Utah Republicans let that happen were by not reforming our dysfunctional caucus/convention system and by not showing up at the caucuses. At least this year we avoided the latter problem.

  • RedShirt USS Enterprise, UT
    Dec. 17, 2012 12:30 p.m.

    To those of you who are trying to use this as a "look TARP turned a profit" moment, you are wrong.

    See CNN "Taxpayers still owed more than $200 billion from bailouts" Unless AIG paid more than $200 billion back, we are still.

    Also, since when is the US government supposed to be using tax money for commercial investments? If I want somebody to invest my money for me, I will call an stock broker, not a politician.

  • Blue Salt Lake City, UT
    Dec. 17, 2012 12:06 p.m.

    Goatesnotes: "And yes, I would have preferred a worldwide financial meltdown as opposed to what we have inherited as the natural consequence of TARP and everything that came afterward."

    Really? You'd prefer global economic failure? 25% unemployment within developed nations? Widespread disruptions of food production? Millions of Americans losing their homes? Massive global political upheaval?

    Do you have some kind of "Road Warrior" post-apocalypse fantasy in your head? I think you must, because that's exactly what "worldwide financial meltdown" would create.

    I swear, Democrats don't need to pay consultants to devise strategies for running against Republicans - all that's required is to just remind voters of what Republicans go around saying out loud.

  • Eric Samuelsen Provo, UT
    Dec. 17, 2012 11:15 a.m.

    We miss you, Senator Bennett. How refreshing to hear a politician say 'I was wrong.' How encouraging to see someone privilege evidence over ideology.

  • VIDAR Murray, UT
    Dec. 17, 2012 11:09 a.m.

    Banks motto: private profits and public risk

  • Kent C. DeForrest Provo, UT
    Dec. 17, 2012 11:04 a.m.

    Thanks, Senator, for the update. Unfortunately, the Republicans have turned TARP into just another myth that they use to test for political purity. When will the GOP come back to reality? Can't see it happening in the foreseeable future.

  • lost in DC West Jordan, UT
    Dec. 17, 2012 10:46 a.m.

    Screwdriver,
    There are still laws in place that prevent the merger of different types of banks. Your classification of “consumer” banks and “commercial” banks is unknown in the industry. Can you explain, please, what types of banks you mean? Do you mean investment banks and commercial banks?

    As evidenced by the debate over TAG extension, dudd-frank failed miserably in its goal of ending too-big-to-fail.

    Actually, the TARP that passed the dem house and senate would have been a miserable failure had not Paulson modified how the funds were used. The dem congress said to buy the bad assets, though no price was established and there was NO market. Paulson used the funds to invest in bank capital – which has been / is being repaid with interest.

    Geithner is reducing the profit the treasury could be making on TARP by converting the 5% – 9% paying preferred stock to common, and then dumping it for less than treasury paid for it. Geithner’s actions make no economic sense.

    Where we will lose money from TARP is the housing and auto bailouts – beyond Paulson’s control.

  • goatesnotes Kamas, UT
    Dec. 17, 2012 10:14 a.m.

    Providing “for the common defense” is one of the primary reasons our Founding Fathers ordained and established the Constitution. Moreover, they clearly wanted the defense imperative to be unmistakable, so they put it in the Constitution’s very first sentence, the Preamble. Later, in Article I, Section 8, they gave Congress the power “to lay and collect taxes” and “to borrow money on the credit of the United States” in order to fulfill the imperatives.

    In short, we have gone far beyond the original intent language, and we continue to gut the meanings based on "modern contingencies" not foreseen as justification for unlimited borrowing, advocated now by Geithner and Obama. The Founders told us to defend America then told us how to pay for it (tax, and borrow on credit). Could the founders have made it any clearer? Maybe, just maybe, if they’d said it something like this: “The president and the Congress must defend this country; to do that properly, Congress must maintain the country’s good credit, and must tax and borrow as necessary.”

    Excessive debt is an existential security threat to us.

  • goatesnotes Kamas, UT
    Dec. 17, 2012 9:59 a.m.

    As the debt ratio increases, the exchange value of the dollar may fall. Paying back debt with cheaper currency could cause investors (including other governments) to demand higher interest rates if they anticipate further dollar depreciation. Paying higher interest rates could slow domestic U.S. growth.

    Higher debt increases interest payments on the debt, which already exceed $430 billion annually, or about 15 cents of every tax dollar for 2008. According to the CIA Factbook, nine countries have debt to GDP ratios over 100% for 2010, the largest of which is Japan at approximately 197.5%.

    Further, a high public debt to GDP ratio may also slow economic growth. Economists Carmen Reinhart and Kenneth Rogoff calculated that countries with public debt above 90 percent of GDP grow by an average of 1.3 percentage points per year slower than less indebted countries. The public debt-to-GDP ratio in March 2010 is about 60 percent of GDP; CBO projects it will reach 90 percent around 2020 under policies in place in 2010. If growth slows, all of the economic challenges the United States faces will worsen.

    That's why debt and deficits will kill America, Mr. Bennett.

  • LDS Liberal Farmington, UT
    Dec. 17, 2012 9:34 a.m.

    Let the GOP witch-hunt of political purity continue.

    They will continue to purge and burn any all so-called RINOs until they are extinct.

    Reminds me so much of the ignorant villagers in Monty Python's Holy Grail.

    "We did do the nose, and the hat...but she's still a Witch!"
    "She has got a wart."

    BURN her anyway!

    Sen. Bob Bennett was burned by his own village idiots.

  • Steve C. Warren WEST VALLEY CITY, UT
    Dec. 17, 2012 9:33 a.m.

    Thanks, Sen. Bennett, for an informative article. I'm no economic whiz, so I particularly appreciated the paragraph below:

    "The details of TARP were not widely understood and it was widely opposed. Those leaders who did understand how serious the problem was, and how well TARP was designed to deal with them, did the right thing and moved ahead anyway."

    This is exactly how a republican form of government should work. Leaders must work hard to understand the issues, then make the best decision, regardless of politics and polls.

    By the way, I think the media have done a poor job of telling us how successful TARP has been.

  • Andy Cottonwood Heights, UT
    Dec. 17, 2012 9:30 a.m.

    Senator Bennett's between the line message - I told you so. And I agree, Sen. Bennett you were right. We should have listened.

    As a state delegate I held Mr. Bennett, a member of the banking committee, responsible for failing to recognize the risks derivative trading posed to the country's financial sector. 700 billion in loans was enormous. Hank Paulson admitted he didn't know how much he needed so he just said 700 B because that was a lot. I was shocked by the apparent recklessness. However, I will now eat crow if the bailout was not a bailout at all, but a short-term stabilizing loan. There were no socializing losses and privatizing profits.

    Unfortunately the consequence, as mentioned above, is new stimulus and TARP step-children every year.

    Is this article an explanation for why so few people went to jail for the collapse.

  • UtahBlueDevil Durham, NC
    Dec. 17, 2012 9:22 a.m.

    "The debt and deficits designed to provide stimulus to the economy have proven to be disastrous, and have only delayed the economic recovery."

    I have seen this talking point so often - minus any facts to support it - it has become silly.

    @Goatsnotes.... ok... provide some study that details how a global banking lending meltdown would have been a better solution to what was done. Anything. Show us all how cutting off credit to most every business, would have been better. How having no working capital would have provided a better solution. How in the world was this worse then the great depression where financial systems did fail.... show us all how this was a worse outcome... please.

  • one old man Ogden, UT
    Dec. 17, 2012 8:23 a.m.

    We need more Senator Bennetts. Unfortunately, it won't happen. At least not in the current GOP.

  • UtahBlueDevil Durham, NC
    Dec. 17, 2012 8:15 a.m.

    "Utah Republicans, you could have had Mr. Bennett, as solid a conservative as you'll ever hope to see, representing you in the Senate."

    Ah, to many Bennett and conservative are mutually exclusive of each other because he was open to that radical concept promoted by out founding fathers - compromise. Despite the fact that TARP has been successful - what is missing from this opinion piece is that FIAT has announced they will buy more Chrysler stock.

    It was a program started by a republican, and implemented by a Democrat. And it worked. Who would have thought.

  • goatesnotes Kamas, UT
    Dec. 17, 2012 8:09 a.m.

    What Bennett fails to acknowledge (and always did as a sitting Senator), is the debilitating precedent TARP established when the government was allowed to begin picking winners and losers. At the time I warned what would ensue when government could continue to be more oppressive and more omnipresent in every facet of our society, and now we see the fruition of the dangerous trajectory that began with TARP. He's right, both parties participated, and so it is - those who favor big government solutions to everything in what was once a free market economy have now achieved their aims.

    And yes, I would have preferred a worldwide financial meltdown as opposed to what we have inherited as the natural consequence of TARP and everything that came afterward. The debt and deficits designed to provide stimulus to the economy have proven to be disastrous, and have only delayed the economic recovery. Keynes was wrong. I believe in optimism, but hailing TARP as a success as he does in this article speaks volumes about why Bob Bennett is now sitting on the outside of Washington looking in.

    He will find no justification for his defeat by claiming victory for TARP.

  • Blue Salt Lake City, UT
    Dec. 17, 2012 7:22 a.m.

    Utah Republicans, you could have had Mr. Bennett, as solid a conservative as you'll ever hope to see, representing you in the Senate.

    But no. You let the Tea Party jerk you around and now we're all stuck with that monumental embarrassment, Mike Lee, who is making a name for himself by being simultaneously doctrinaire and breathtakingly incompetent.

  • Something to think about Ogden, UT
    Dec. 17, 2012 6:57 a.m.

    I appreciate Mr. Bennett's honesty in this matter. I wish more people in Washington were 'pragmatic' in their assessments, as Bennett appears to be on this issue.

  • Twin Lights Louisville, KY
    Dec. 17, 2012 6:56 a.m.

    Unfortunately, some will greet any news regarding govt. success as failure when seen through a different lens. They want no evidence. Only talking points.

  • JoeBlow Far East USA, SC
    Dec. 17, 2012 6:42 a.m.

    I guess sometimes SOCIALISM can be very profitable.

    Does that make up for the Solyndra?

  • christoph Brigham City, UT
    Dec. 17, 2012 5:52 a.m.

    Mr. Bennett, we miss you; why can't other Utahn Congressman be positive and cheerful? The government, just like business, makes money; nothing wrong with that.

  • Screwdriver Casa Grande, AZ
    Dec. 17, 2012 2:41 a.m.

    Those that opposed TARP should at least be in favor of going back to limiting consumer and commercial banks from merging. Commercial banks can take as much risk as they want - with their own money and no planned or unplanned government backing.

    But governing banks seems to be a one party ideal now.