Q&A of the Day – Were Corporate Bailouts Ever Paid Back?

Its clear President Trump has chosen to use the effective lessons of the past as a strategy to deal with current day challenges as well...and as noted – it's already proven to be a profitable strategy

Episode Transcript

Speaker 1 (00:04):
Your questions, Brian's answers. It's time for today's Q and
A of the day. This is the Brian mud Show.
Today's Q and A where corporate bailouts ever paid back.
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(00:26):
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(00:47):
thinking out loud here. Anyway, when you're there, you'll see
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may lay down the message right here, maybe something for
a future Q and A like this. Good morning guys,
did the banks and the airlines iver pay back the
bailout money. Thank you have a good day. Yeah. So,
in the wake of the longest federal government shutdown in

(01:08):
the American history, and with the debate on going about
the future of Obamacare and the Not So Affordable Care
Act subsidies, comes today's question about what happened with federal
government bailouts of kind of that same era. It started
during the previous administration, because TARP actually came about when

(01:30):
Bush was still president and Republicans still had influence in Congress,
which was not the case at all when the Not
So Affordable Care Act was passed with Democrats in control
of everything. But whatever happened to the taxpayer money used
to prop up the banks, auto companies, and related companies.
So the Troubled Asset Relief Program I remember TARP. It

(01:53):
was established in October of two thousand and eight, the
financial crisis was really getting going. Under the Emergency Economic
Stabilization Act, and A doled out money to a total
of nine hundred and ninety one companies. The total amount
doled out six hundred and thirty five billion dollars, with

(02:15):
five hundred and fifty five billion of that going to
financial service companies and about eighty billion going to other entities,
largely American automotive companies. The stated objectives at the time
were these, prevent the collapse of major financial institutions, restore
liquidity and confidence in the credit markets, and mitigate foreclosures

(02:36):
and support economic recovery. So the way TARP was carried
out worked like this. The US Treasury was authorized to
purchase up to seven hundred billion dollars and troubled assets.
So called troubled assets, often like mortgage backed securities from banks.
Funds were primarily used for direct capital injections into the

(02:58):
banks via preferred stock purchases. Now it's that second piece,
the preferred stock purchases, that proved to be key in
the long term outcome of the TAR program and its
impact on taxpayers. Had the program simply been reliant on
companies repaying the bailout money they received the program, what

(03:20):
do you think, Joel, It just simply hey, we gave
you this, give it back. You think that would have
think that worked out? No, did not. You're right. Of
the six hundred and thirty five billion paid through the program,
only three hundred and ninety billion was ever directly paid back.
Not only would that have been a loss of two

(03:42):
hundred and forty five billion dollars. That's back then in
two day's dollars, that it would have been the equivalent
of a three hundred and seventy billion dollars loss, or
the equivalent of nineteen hundred dollars per federal taxpayer. But
and there's a big old b on this butt in

(04:05):
a good way for a change. That wasn't the end
of the story. Due to the stock ownership interest in
many institutions which recovered from the financial crisis, an additional
three hundred and fifty three billion dollars was derived through
those assets over time, and by the time the program

(04:27):
was unwound, TARP produced a net profit for the federal
government of approximately one hundred and eight billion dollars. Among
the largest recipients of TART funds, here are names that
turned a profit for the federal government. Many of them
were like where most of the angst was pointed at

(04:50):
the time this was all going down. Fannie May, Freddie
mack Aig, City Group of America, JP, Morgan, Chase, Wells, Fargo,
Ally Financial, Morgan, Stanley, Goldman, Sachs, PNC, capital Ie, sun

(05:12):
Trust now Truist, and American Express all term profits. Among
the companies that lost money for the federal government during
TARP General Motors, Chrysler, Wells, Fargo's mortgage servicing company, JP
Morgan Chase's mortgage servicing company, Bava's mortgage servicing company, and
also City Mortgage back in the day. So with nine

(05:32):
hundred and ninety one companies having been involved, there are
no short just story lines associated with the TARP program
back in the day, how the bailouts were doled out
and everything else unbalanced. Though the TARP program proved to
be a success, serving to create some stabuilding in the
financial system while again leading to a net profit, a
meaningful profit by the time it was all unwound, and

(05:55):
so notably the federal government's equity interest in companies proving
to have been a good value for taxpayers. We actually
have President Trump most recently, it's kind of employed that
strategy while seeking to secure rare earth minerals and technology
needs for US defense efforts. Back in August, President Trump
invested just over eleven billion into Intel. By the way,
based upon Intel's current share price, the federal government has

(06:15):
already realized about a seven and a half billion dollar
profit on that investment. The Trump administration also ended up
investing in rare earth mineral companies. One of those investments
made just last week. For what we can see in
the public markets already a ten percent net return on that.
So it's clear that President Trump's kind of using some
of those techniques that were successful during the troubled asset

(06:40):
relief program this preferred stock purchases in a different way
to deal with some of our country's needs today. Of course,
there's that fine line because you go too far with
this thing, then you start talking about nationalization. Obviously now
where we want to go