Government Already Overpaid By $78 Billion In Bailout Money

from the transparency? dept

Fri, Feb 6th 2009 6:33am — Mike Masnick

Well here's a quick, but depressing one. As politicians are still debating the stimulus package, the head of the Congressional Oversight Panel for the TARP bailout funds is admitting that we, the taxpayers, appear to have already paid $254 billion for assets that appear to be worth $176 billion. That's a shortfall of $78 billion that may have just gone up in smoke, effectively. Now, it may eventually happen that the assets we now own appreciate in value, and that money is made back, but this is the key problem with just having the gov't jump into "buying" bad assets. It's almost guaranteed that they're going to overspend. If that doesn't make you uncomfortable about what sort of mess we're going to get with the stimulus package, I don't know what will. The government isn't just throwing money at a problem that might not need money -- it's doing it badly. On a historic level.

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Filed Under: bailout, overspending, tarp, transparency

24 Comments

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Phillip, 6 Feb 2009 @ 6:38am

Did anyone really expect the government to handle any of this well?

Thousands of prior examples have shown that the government is possibly the worst organization to handle tasks like this.

This is not shocking or surprising.
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John, 6 Feb 2009 @ 6:59am

How do we know we overpaid?
One of the biggest problems with the bank bailouts is how to value the structured credit assets. The banks don't know what they're worth, the government doesn't know. Huge, wide bid-offer spreads tell us that the market doesn't even know. So here we have a Harvard professor who can calculate the precise value of the TARP assets (in order to arrive at the conclusion that the government overpaid by exactly $78 billion). She should start a hedge fund.
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John, 6 Feb 2009 @ 7:03am

How do we know we overpaid?
One of the biggest problems with the bank bailouts is how to value the structured credit assets. The banks don't know what they're worth, the government doesn't know. Huge, wide bid-offer spreads tell us that the market doesn't even know. So here we have a Harvard professor who can calculate the precise value of the TARP assets (in order to arrive at the conclusion that the government overpaid by exactly $78 billion). She should start a hedge fund.
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Janet Altman, 6 Feb 2009 @ 7:42am

Another issue in all the economic trumbling about of business interest is that there is no mishandling of digital security. And what I mean by this is letting it go just a minute.

I'd appreciate an article about this topic if you feel that you can get enough solid information on it.

http://www.justaskgemalto.com
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Stephen Downes (profile), 6 Feb 2009 @ 7:57am

The government...
I think in posts like this you need to distinguish between "the government" and "the Bush government".

So when you say "The government isn't just throwing money at a problem that might not need money -- it's doing it badly" what you mean is "The Bush government wassn't just throwing money at a problem that might not need money -- it was doing it badly."

The current government, which has a clue (unlike the Bush government), is far less likely to make $78 billion simply disappear.
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Anonymous Coward, 6 Feb 2009 @ 8:06am

If the assets were not bad, would the companies have need to money in the first place?

And Stephen, get real, stop your Obama worship and look at what is in the stimulus package. Not everything is GWB's fault. Lets see, who controlled congress when (the Bush govt.) overspent?

The republicans voted against it, and should continue to vote against it. They should also cancel their 4% mortgage plan, as that would be a waste of money also.
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Anonymous Coward, 6 Feb 2009 @ 8:06am

The problem is the people approving the spending of this money can't even comprehend the magnitude of it (very few people can).

We should somehow tie the performance of these investments to their personal assets. Then they might give a shit. $78 billion gone? There goes their house. Maybe they would pay more attention to what they're throwing money at next time.
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IQ 10, 6 Feb 2009 @ 8:15am

Re: The government...
Ok.. Your just dumb. Don't speak ever again.
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Anonymous Coward, 6 Feb 2009 @ 8:15am

This is what happens when people that ran for office to satisfy their egos get the power to spend billions and billions of dollars.

What are the qualifications to be congress? You have to be a certain age and be elected. That's all it takes, and suddenly you have control of ungodly amounts of money!
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Anonymous Coward, 6 Feb 2009 @ 8:54am

The assets would have been overpaid for even if they were valued correctly because the value of those assets are in a downswing right now. Such a grand scale is disheartening though.

All of this money seems to be going to banks so they can loan out more money and put more people in debt. It doesn't seem to be stopping any foreclosures or anyone keep their jobs. Ok, they over paid for assets..where did that money go, how is it helping? Oh that's right....it helped AIG take all their exuctives to New York where they could each stay in rooms that cost like 20k a night.

What really amazes me is that wall street bankers earned almost 20 billion dollars in bonuses in 2008. How the hell does that happen? I know I sure as heck would not receive any type of bonus if I failed at my job so badly it destroyed the global economy.
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Chris, 6 Feb 2009 @ 9:04am

Duh?
Wasn't the entire point of the bailout to buy these bad assets at more than they are worth? If we paid the banks the actual value of the assets, they'd still be insolvent; that's the entire problem. So we're bailing them out by buying up these assets for more than they are actually worth.

I'm not saying it's a good idea, but it's not like this should have come as a surprise. Honestly, the sensationalism at Techdirt is getting worse and worse lately.
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Anonymous Coward, 6 Feb 2009 @ 9:10am

Bailing WHO out and how is it helping?
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Anonymous Coward, 6 Feb 2009 @ 9:15am

Re: Duh?
I'm not sure that putting real numbers to even a notional idea of how bad this was expected to be is "sensationalism." It's not a surprised that we overpaid, sure, but you don't find it a little troubling how much we've over paid?
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Killer_Tofu (profile), 6 Feb 2009 @ 9:53am

My Interpretation
My interpretation of all of this is that any idea of a stimulus or bailout was more so just meant to throw more money at the rich people who run things.
Which not only the Bush approved TARP was doing, but the Obama pre-approved stimulus bill is looking like it will do as well.
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GHynson, 6 Feb 2009 @ 10:17am

Haaaa,.
$78 billion,..
What do you expect, when the American Tax Payers
are the dumbest people to set foot on the planet.
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Anonymous Coward, 6 Feb 2009 @ 12:13pm

Re: The government...
You mean the Dem controlled congress that passed the bill in 08' to spend the money has a clue?

Explain how fixing a road will get anyone a job?
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Dave (profile), 6 Feb 2009 @ 12:37pm

Re: The government...
Obama and friends on Capitol Hill didn't even know the country was in a recession for over 12 months until they got a memo in Dec. '08 None of these politicians has any clue how to create permanent U.S. jobs to build a stable economy. Instead they plan to throw $850 Billion at welfare programs and drive up the national debt. This will just extend the economic depression to a full decade or more.
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Lawrence D'Oliveiro, 6 Feb 2009 @ 1:06pm

Re: Phillip

Thousands of prior examples have shown that the government is possibly the worst organization to handle tasks like this.

Are there any examples showing that, say, private enterprise does a better job of bailing itself out?
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Fentex, 6 Feb 2009 @ 4:52pm

Conflating issues
It is not worthy to conflate the bailout deals with extra stimulus spending.
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Mike (profile), 6 Feb 2009 @ 6:52pm

Re: Conflating issues
It is not worthy to conflate the bailout deals with extra stimulus spending.

Not conflating the two. Just pointing out when they screw up something as "simple" as TARP so much, shouldn't we be a bit worried about how the stimulus will go down.
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Concerned Citizen, 6 Feb 2009 @ 9:26pm

Re: The government...
Stephen, "the current government" is just as stupid as "the Bush government".

They insist on throwing our money down the rat hole of insolvent banks -- by the way, the Level 3 toxic derivatives (IRS and CDS) with a notional value of $600 trillion exceed the combined balance sheets of all the countries of the WORLD.

The only thing the bailout is doing is temporarily protecting sovereign wealth funds (i.e. Saudi Arabia, China, etc.) and hedge funds who are the counter-parties to these bad trades. THEY are the ones being bailed out. "We the People" are going to get stuck with the bill.

The only way to solve this is immediate bankruptcy, with protection for depositors.

"The current government" at the rate they are going will make $78 TRILLION simply disappear. Get over it and start paying attention.
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George Johnston, 6 Feb 2009 @ 10:40pm

TARP was a bad idea
TARP was a Bush-Cheney junta deal. Funding battery research isn't the same thing as offering to buy worthless pieces of paper for a trillion dollars. Paying Americans to rebuild the bridges and cities that fell down during the Republican junta is not a bad idea.
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Anonymous Coward, 7 Feb 2009 @ 10:38am

And paying for birth control won't stimulate the economy either. So all the buildings fell down under GWB? George, you really need some bailout money to buy a clue, either that or you have just drank too much kool aid.

Seems to me Obama authorized the release of the second half of that money. GWB wasn't going to do it until Obama lobbied to have it released.

The problem is people like you play politics with this instead of looking at what is the right thing to do.
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Al Otto, 7 Feb 2009 @ 2:32pm

Government Already Overpaid By $78 Billion In Bailout Money
Of course we are over paying. The reason is we are paying from the top down as apposed to bottom up. The official reason given was labeled as toxic mortgages, these were all bundled into security investment packages and were offered to select markets, only large banks and large insurance companies. It is here where the problem really begins. The TARP paid these companies holding the toxic mortgages. No one knows or even cares to know if only the value of the toxic mortgages were paid for by the FED$ of if the TARP funds went to pay the total investment of this worthless paper/investment.

Regardless the FED$ paid what they did. Only thing to ask now is why are these note/mortgages still on the books at the point of origin? All of the Toxic Mortgages are still on the books at your local banks. And this is one of the causes of the credit crunch we face now. Banks aren't permitted to borrow FED$ dollars when they hold foreclosed notes. If this is not address the TARP will by times end pay three to fours times of the total toxic mortgages on the market. The FED$ aren't smart enough to see this. Or is it because the American people are just so stupid and filled with apathy that the FED$ count on their stupidity

I think its both. but hey. what do I know right!
AL Otto
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