Was Washington Right to Bail Out GM and Wall Street with TARPHistorians will look back on Washington's bailout of GM and Wall Street as the right move. That's because it's now clear that the costs of doing nothing would have been far higher than the expected losses. Better yet, it turns out that the U.S. taxpayer may suffer only limited losses on this economic Hail Mary pass.

Back when the government was making its decisions about bailouts, there was substantial concern that they wouldn't work and that the entire investment of taxpayer's money would go to waste. But in weighing the costs and benefits, it's clear that the decision-makers came to the conclusion that the dangers of sticking with a policy of free-market, laissez-faire capitalism -- millions of people losing their jobs (in the case of a GM liquidation) and the collapse of world's financial system (which would have made everyone's bank deposits and money market funds worthless) -- were too high.

Now, it looks like the TARP will lose only a small fraction of the $386 billion it invested in propping up companies (out of the $700 billion it had available). The bailout of GM could break even, and if it doesn't, it will cost taxpayers a relatively small sum. Bailing out the financial system during the far less terrifying Savings & Loan Crisis of the early 1990s under the first President Bush cost far more: $220 billion. On a risk-return basis, historians will view TARP as having been a cheap way to avert a global disaster.

With GM's $23.1 billion initial public offering in the news this week, it's worth pointing out that the risk to taxpayers of this bailout still looks to be the highest. In 2009, the U.S. invested $43 billion in GM stock through the TARP, and extended a loan of $7 billion, which GM repaid in April 2010, according to Reuters.

On Thursday, GM raised $15.8 billion, selling 478 million shares at $33 apiece. This allowed the Treasury to reduce its stake in GM from 61% to 37%, reports Bloomberg. But in order for the government to completely recoup the $43 billion it invested, those remaining shares will need to gain 65% to about $54.40 -- the price at which the Treasury's remaining 500 million shares would be worth $27.2 billion.

Overall, TARP is expected to lose a comparatively modest amount. According to the The New York Times, an October 2010 tally estimated that its total cost to taxpayers would be less than $50 billion, with the other big potential sources of losses being the bailouts of American International Group (AIG), Fannie Mae and Freddie Mac.

It's not over yet, but it's beginning to look like the biggest losses from TARP could be the losses of congressional seats due to public anger at those who supported it.


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Joy

Absolutely yes!! What was the republican alternative? Do NOTHING and lose literally thousands of good jobs. Yup that is capitalism and republicanism at it purest.

November 19 2010 at 9:17 AM Report abuse +1 rate up rate down Reply
gimmea6

The IPO was gobbled up by and benefited most the very entities that were most at fault for the economic breakdown: the unions (UAW) and the big Wall St. banks. Obama talks out of both sides of his mouth. The little guys got nothing out of this.

November 19 2010 at 7:03 AM Report abuse -2 rate up rate down Reply
frank1946

Roger Smith and China saved GM, not Obama, USA market loses $$$ for GM. Shut down American Plants and move on to China where profit works !

November 19 2010 at 1:39 AM Report abuse -2 rate up rate down Reply
donaldfy2

Well, it looks as if all you Obama haters still won't give the man credit, even when his program appears to be working. No, I didn't like the idea of bailing out these lousy banks; as far as I'm concerned, they ALL could have went belly up but the GM bailout WAS the right thing to do, and the numbers are proving it. I say let's stay the course.

November 18 2010 at 11:38 PM Report abuse +5 rate up rate down Reply
jonesnj529

Nope, never should've happened. While the middle class struggle, some a-hole stock broker is taking a bath in 100 dollar bills. As for GM? if they were gonna fail, they should've let them, now were supporting a money pit with no hope of success.

November 18 2010 at 9:43 PM Report abuse -2 rate up rate down Reply
In God's faith

N O The FED just bought and now owns them, just like they own all of us. Im tierd of being a SLAVE. A slave is someone who works so someone else gets the benifit. The whole world gets for free what I slave to do. I am done with this, Liberty or Death, one or the other will be coming to me soon, and I am at the point that I am fully ok and ready for one or the other. At 26 years old, Im not willing to go any longer as a slave. Stop the illegal wars for Khazar/Jews in fake/Israel, Ron Paul may be our last peaceful hope, after that it's all fighting on the streets of America for Liberty or for Death. Wish George Washington was hear to lead us, but our founders all ready led by example, so I know what to do

November 18 2010 at 8:41 PM Report abuse -2 rate up rate down Reply
steve

Y E S

November 18 2010 at 6:14 PM Report abuse -3 rate up rate down Reply
anthonyrocky2

WHILE THE REPUBLICANS COMPLAIN ABOUT THE BAILOUTS OF THE CAR COMPANIES, AND WALL STREET, THEY FAIL TO MENTION THAT GEORGE SR. BAILED OUT THE SAVINGS AND LOAN INDUSTRY BACK IN THE 1990'S. IF MY MEMORY SERVERS ME CORRECTLY, WASN'T THE THIRD BUSH BROTHER, THE ONE THAT YOU NEVER HEAR OF, WAS ONE OF THE MASTERMINDS OF THE FAILURE OF THE S&L?.... THE REPUBLICANS HAVE ALWAYS BEEN AGAINST GOVERNMENT REGULATIONS FOR WALL STREET AND BIG BUSINESS. GM HAS ALREADY PAID A LARGE PORTION BACK TO THE GOVERNMENT, AND I JUST HEARD YESTERDAY, THEY ARE SHOWING A HUGE QUARTERLY PROFIT. THE OBSTACLE IS BOEHNER AND HIS RIGHTWINGER BUDDIES, WHO ARE AGAINST EVERYTHING, AND ARE STANDING IN THE WAY OF PROGRESS. THE AMERICAN PEOPLE WANT PROGRESS, NOT NAYSAYERS. THIS IS NOT THE LAST ELECTION, THERE WILL BE MANY MORE ELECTIONS, SO IF THE RIGHTWINGERS STOP PROGRESS, IT WILL BE REMEMBERED, NEXT TIME AROUND! I APPLAUDE PRESIDENT OBAMA.

November 18 2010 at 5:10 PM Report abuse -4 rate up rate down Reply
mad127d

How much of the loan has been paid back? Big boys are gonna pump n dump this one before the turkey sandwiches are finished.

November 18 2010 at 3:59 PM Report abuse -1 rate up rate down Reply
bmt096

Thank you Peter for reminding people of the S&L banking scandal of the 90's when the banking system was on the verge of collapse too. Pres Bush (1st) and the Feds bailed them out and did not receive any ROI (return on investment). At least under Obama & the Feds the banks have repaid or are repaying the monies we loaned them. GM has repaid their loans also! People should give credit where credit is due and stop complaining about "everything". Afterall, we are supposed to be a United State so let's start acting like that! PS: I am also a senior citizen and I am concerned about SS as well but if we have to give up a little to help the country stay afloat, I for one, am willing to do my part.

November 18 2010 at 12:13 PM Report abuse -3 rate up rate down Reply