The U.S. government created innumerable bailout programs that spent, lent, guaranteed, pledged, or otherwise used trillions and trillions of dollars to prevent a complete collapse of the financial system in 2007-2009 and to respond to the economic crisis it caused, the effects of which continue to this day. The much ballyhooed $700 billion TARP program was but one of the countless emergency measures adopted to bail out Wall Street.
The financial industry, its allies and purchased mouthpieces (plus way too many politicians who know better) attempt to minimize and understate the depth and cost of the crisis. Indeed, some talk misleadingly as if TARP was the only government rescue program and some even claim that TARP will make money. That is not accurate. The TARP alone is currently projected to cost about $60 billion (depending on how you count, what you count and what you include to offset).
However, even if all the money TARP lent was paid back (and it won’t be), that doesn’t mean it would have “made” money. The meritless claim that has been made is that if TARP (or any one of the other bailout programs) takes in one penny more than it lent (or the other programs spent, pledged, guaranteed, or otherwise used), then it made money. That is simply misleading spin and propaganda. The only proper way to evaluate any of these programs is what any return was or should have been on a risk adjusted basis. By that measure, not only have none of the government bailouts “made” money; they have all cost taxpayers and the government hundreds of billions if not trillions of dollars (above and beyond all the other costs).
All the Wall Streeters and their allies know this (even thought it’s not in their interest to say so). Don’t believe me. Just look at Warren Buffett’s investment in Goldman during the crisis. Look at the return he insisted on for his investment and compare that to the return on any government program. No comparison. Buffett made a fortune, while the government — meaning, of course, taxpayers — got taken to the cleaners.
And, remember, Buffett’s investment came AFTER the U.S. government intervened and pledged to rescue the entire financial system. Given that, one could argue that Buffett’s return was the risk-free rate of return NOT the risk-adjusted rate of return. Therefore, not only didn’t any of the U.S. government rescue and bailout programs get the Buffett rate of return, they certainly didn’t get the proper risk adjusted rate of return.
Long way of saying, don’t believe anyone who says the bailouts were paid back or that the government made money on the bailouts. The facts and basic economics proves them wrong.
Then, of course, there’s the cost of the crisis, which our study shows is more than $12.8 trillion. So, even if a few bucks were made here or there, there’s no way the US is going to “make money” off of anything.