Profit from bank bailout - DFWstangs Forums
 
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post #1 of 9 (permalink) Old 08-31-2009, 06:46 AM Thread Starter
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Profit from bank bailout

Not a bad return...

Nearly a year after the federal rescue of the nationís biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.

The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.

Full article:

http://www.msnbc.msn.com/id/32623489...new_york_times

Yes, there is still a lot of money out there (GM, Chrysler, etc.), but seeing a 15% return is nice. Let's hope this news is repeated often.

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post #2 of 9 (permalink) Old 08-31-2009, 08:19 AM
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I think GM and Chrysler was something like $50Billion total. A lot of money but nothing compared to the bank bailout.

But the article doesn't give you any information on WHY the banks are profitable at a time when foreclosures are still pretty big. If you listen to Elizabeth Warren's interview (on that same MSNBC page) you'll find that one reason these guys are showing a profit is because they are being allowed to value those toxic assets at a higher value than they are really worth. If they had to value them at their true worth, they would be in deep trouble again. She also mentions a ton of commercial loans that are coming due and are likely to fail. In other words we will be doing this again....

I've got to go digging, but I recall a few other reasons why the big banks are making big profits. One is that they have made HUGE increases in credit card and bank fees. Another is that they have made some really good coin driving up stocks and futures and leaving smaller investors holding the bag. Again, I need to go look some of this up but maybe AL P has some more insight.

It just seems to me that this "paper" recovery is borne on the backs of the middle class and the poor more than anything. But at least we'll be seeing some of that TARP money returned. So now I want to know what are they going to do with that money? Are they going to pay off the debt the US built from creating that debt or will they use it for something else? Even the profits from TARP need to be put back on paying off debt.

Another question I've got goes to what the heck is the administration going to do to keep this from happening again? Elizabeth Warren has advocating re-instituting Glass-Steagall. IMO she actually has made some great arguments for this. If those banks are too big to fail, then they are too big period. They need to be broken up so the US economy is not at risk when they fuck up as they have. If we don't move on this quickly, we'll be fucked in a way that will make 2009 look like a cake walk..

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post #3 of 9 (permalink) Old 08-31-2009, 08:20 AM
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I'm sure the government will just spend the money they're being paid back with as well rather than use it towards the debt.

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post #4 of 9 (permalink) Old 08-31-2009, 05:58 PM Thread Starter
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I'd vote for paying down debt, but if I had to wager, I'd say you'll see some of it in another cash for clunkers campaign Q1 2010.

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post #5 of 9 (permalink) Old 08-31-2009, 06:06 PM
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Does that justify the 3.5 million jobs that have been lost?
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post #6 of 9 (permalink) Old 08-31-2009, 06:28 PM
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Commercial real estate is still very much in crisis mode with no end in sight. There are a lot of loans to refinance with not a lot of lenders. We are closing on a big loan this week, ~$60 million on some existing properties. We are also shopping another loan around. The first was pretty tough to get. We had a list of 60 banks and ended up with only one that wasn't offering ridiculous terms.
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post #7 of 9 (permalink) Old 08-31-2009, 08:07 PM
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Quote:
Originally Posted by AL P View Post
Commercial real estate is still very much in crisis mode with no end in sight. There are a lot of loans to refinance with not a lot of lenders. We are closing on a big loan this week, ~$60 million on some existing properties. We are also shopping another loan around. The first was pretty tough to get. We had a list of 60 banks and ended up with only one that wasn't offering ridiculous terms.
I've been hearing that there will be another round of home mortgage forclosures, mainly due to all the ARM's coming due. The report said most of the first round were sub-prime notes.

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post #8 of 9 (permalink) Old 08-31-2009, 08:53 PM
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Funny enough, I outlined an article on this today. Here are my key takeaways:

I. Big banks repay bailout money
A. As 8 biggest banks repay bailout money govt sees $4 B in profits
1. Roughly 15% annualized basis
2. Mosty from preferred stock that govt took stake in last year
a. $1.4 B from Goldman Sachs
b. $1.3 B from Morgan Stanley
c. $414 MM from American Express
B. Equivalent investments by private investors would have yielded 3x the profits
1. Government grossly overpaid
a. most estimates imply the govt overpaid by 34%
C. Still not out of the woods
1. Citi and Bank of America haven't repaid loans
2. As share prices have soared, govt sitting on $15 B in paper profits
a. still greatly at risk due to uncertainty in the 2 banks'
loan portfolios
(i) potential losses could wipe out all profits to date

Last edited by slow99; 08-31-2009 at 09:00 PM.
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post #9 of 9 (permalink) Old 08-31-2009, 09:10 PM
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Quote:
Originally Posted by slow99 View Post
Funny enough, I outlined an article on this today. Here are my key takeaways:

I. Big banks repay bailout money
A. As 8 biggest banks repay bailout money govt sees $4 B in profits
1. Roughly 15% annualized basis
2. Mosty from preferred stock that govt took stake in last year
a. $1.4 B from Goldman Sachs
b. $1.3 B from Morgan Stanley
c. $414 MM from American Express
B. Equivalent investments by private investors would have yielded 3x the profits
1. Government grossly overpaid
a. most estimates imply the govt overpaid by 34%
C. Still not out of the woods
1. Citi and Bank of America haven't repaid loans
2. As share prices have soared, govt sitting on $15 B in paper profits
a. still greatly at risk due to uncertainty in the 2 banks'
loan portfolios
(i) potential losses could wipe out all profits to date

Notice that nothing in that list included the taxpayers ever getting out from under the burden of paying off all that original debt...hhhmmm. Interesting!

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