logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Too Big to Fail: The Current Status of Major Government Bailouts

By  +Follow July 3, 2013 11:04AM
Share:
Tickers Mentioned:

The financial crisis of 2008 and 2009 sent the American economy into complete free fall. Mortgage providers, investment banks, automakers, and other businesses nationwide were on the cusp of total collapse, and fears of a second Great Depression mounted on a daily basis.

However, the government stepped in with a number of enormous, unprecedented, and controversial bailout packages to help rescue the economy. Here’s the current status of each one.

American International Group (AIG)

Bailout: $85 billion at 14.5 percent interest

Recovered: $107.7 billion

Net Result: $22.7 billion profit

Background: AIG received its first bailout funds in September of 2008 after the insurance giant became crippled by mortgage-related securities, particularly credit default swaps (CDS). The insurance giant had sold a huge portion of CDS, which generated huge losses for AIG when the housing market went bust.

In August 2009, the company hired a new CEO in Robert Benmosche, who has since gotten the company back on its feet. AIG began repaying its bailout funds in 2010, restructured its bailout in 2011, and became fully independent of government ownership in December 2012.

TARP Bank Bailouts

Bailout: $245.1 billion

Recovered: $271 billion

Net result: $25.9 billion profit

As part of the government’s Troubled Asset Relief Program (TARP), the government dispersed almost $250 billion to a plethora of major American banks, according to the Treasury website. Some major banks, such as Bank of America (BAC) and Citigroup (C), desperately need the money to stay solvent. Other banks like JPMorgan Chase (JPM) took bailout funds by force to strengthen the credit market.

While the Treasury claims a $25 billion profit on the bank bailouts, this figure is widely disputed. Some banks still haven’t paid back TARP funds, and because the financial landscape was an absolute mess during the Great Recession, the specifics of TARP funds remain convoluted.

Automakers

  • Ford (F)

Bailout: $5.9 billion loan

Recovered: $400 million

Expected Result: Loan paid back by 2022

Background: Ford CEO Alan Mulally famously avoided government bailout money by selling off struggling brands like Mercury, Volvo, and Land Rover. The company also upgraded its existing models with nicer interiors, sharper design, more horsepower, and better fuel economy, which has allowed Ford to emerge as one of the world’s best-selling automakers.

Ford, however, was forced to take a $5.9 billion in June 2009 to upgrade its factories and develop its hybrid and electric models, part of the same loan package given to Tesla Motors (TSLA). While the loan was not classified as a bailout, its timing was designed to ensure Ford remained on strong footing in case the economy took a turn for the worse.

  • General Motors (GM)

Bailout: $49.5 billion

Recovered: $32.5 billion

Expected Result: $10 billion loss

Background: On the verge of total collapse, General Motors received an infamous $49.5 billion bailout in early 2009. The company then filed for Chapter 11 and underwent enormous restructuring. When the company finally got back in its feet in 2010, GM returned to public markets and raised $20.1 billion in its IPO, the largest in history.

Although GM is back in business and fully profitable, the company’s success story is overshadowed by the fact that the government has a loss on the bailout. According to the LA Times, the government still owns around 189 million share of GM that it intends to sell, and based on the current share price, the government will recover $10 billion less than it paid.

Bailout: $12.5 billion

Recovered: $11.2 billion

Net Result: $1.3 billion loss

Background: Chrysler, like GM, was on the verge of bankruptcy and even threatened to permanently shut down production without government intervention. The Bush administration responded with a $12.5 billion bailout package, allowing the company to stay in business, become more efficient, and develop its line of vehicles. According to CNN, the government sold the last of its Chrysler stake in 2011 to the tune of a $1.3 billion loss.

Fannie Mae and Freddie Mac

Bailout: Government makes $200 billion investment, takes charge of $5 trillion in loans

Recovered: Unknown

Net Result: Outcome Pending

Background: The September 2008 takeover of Fannie Mae and Freddie Mac, America’s largest mortgage providers, was one of the boldest government-sponsored financial decisions in history. With Fannie and Freddie were losing billions of dollars per month and the U.S. credit market on the verge of total destruction, the government decided to take over the two government sponsored enterprises (GSE) in hopes of keeping the U.S. credit market at least somewhat in tact. 

A recent report from Equities.com claims that Fannie and Freddie have become wildly profitable in recent years, earning $17 billion and $11 billion in 2012 profit, respectively. While the two enterprises are profitable and have dispersed over $81 billion in dividends to the government, the net result of the investment is unknown.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for F
Market Parse
3 Mar 15 18:30:28
@mathDSb $F Your tweet has been featured on Market Parse, for iPhone. http://t.co/YHInvBCk4m
James DiPlata
3 Mar 15 18:29:08
RT @reviewgal: Evening scans: $DAL $DG $GOOG $GOOGL $AAPL $GM $F $SLV $DUST http://t.co/YU579z0Ece http://t.co/HDjcKNBKjA
Ryan Ruggiero
3 Mar 15 18:25:32
Crews are responding to a 3-Alarm fire at the Ford Plant on Lakeshore Road - WGRZ $F
Sam
3 Mar 15 17:45:10
Evening scans: $DAL $DG $GOOG $GOOGL $AAPL $GM $F $SLV $DUST http://t.co/YU579z0Ece http://t.co/HDjcKNBKjA
arXiv gr-qc
3 Mar 15 17:43:46
Disentangling the $f(R)$ - Duality. (arXiv:1411.6010v2 [hep-th] UPDATED) http://t.co/S1UjpOgAEO
Seeking Alpha Alerts
3 Mar 15 17:34:11
@nybigtymer Subscribed to $F To add another: subscribe $SYMBOL @sa_alerts To unsubscribe: unsubscribe $SYMBOL @sa_alerts
Sheraz
3 Mar 15 17:33:21
@sa_alerts subscribe $F @sa_alerts
ProVesting
3 Mar 15 17:28:05
$F: Bloomberg: Farley: Ford Still Sees Russia As Important Market: http://t.co/9AWW9fJH9m
StockNewsWires
3 Mar 15 17:12:02
$AAPL $TSLA $GM $F: Apple Exploring Resolution of Battery-Maker's Poaching Suit: http://t.co/goyGsIOIjG
Breaking News Now
3 Mar 15 16:36:01
$F: US stocks close lower, one day after reaching record-highs: http://t.co/nBekpg1Ryo
Sufiy
3 Mar 15 16:31:57
RT @ILCtsxv: Kirill Klip.: Powered By Lithium: Tesla Model S P85D In Cold Weather. http://t.co/0CXiCy83wB $TSLA $AAPL $LIT $ILHMF $GM $F
Sufiy
3 Mar 15 16:31:54
RT @ILCtsxv: Kirill Klip.: Powered By Lithium: Audi Q7 e-tron 3.0 TDI Quattro. http://t.co/7qowXtmF1R $TSLA $AAPL $LIT $ILHMF $F $GM
Sufiy
3 Mar 15 16:28:38
RT @kirillklip: Kirill Klip.: Powered By Lithium: Tesla Model S P85D In Cold Weather. http://t.co/OebPxDR6b8 $TSLA $AAPL $LIT $ILHMF $GM $F
Sufiy
3 Mar 15 16:28:30
RT @kirillklip: Kirill Klip.: Powered By Lithium: Audi Q7 e-tron 3.0 TDI Quattro. http://t.co/MusjppHROp $TSLA $AAPL $LIT $ILHMF $F $GM
arXiv math.DS
3 Mar 15 16:16:48
Cruz, Mena-Matos, Sousa-Dias : Dynamics of the birational maps arising from $F_0$ and $dP_3$ quivers http://t.co/qreGIylYrz
BlueSky
3 Mar 15 16:05:22
RT @StockSignaling: Visual Stock Comparison Tool: http://t.co/DEd0xkdNq4 : $JD $NXPI $MDR $C $BBY $AAPL $TSEM $KATE $MSFT $GM $BBRY $BAC $S…
Tiger Shark
3 Mar 15 15:59:41
RT @StockSignaling: Top Stocks (By Trading Liquidity): $JD $NXPI $MDR $C $BBY $AAPL $TSEM $CODE $KATE $GM $MSFT $BBRY $BAC $SIRI $F http://…
Robert J. Kim
3 Mar 15 15:44:54
RT @ipwire: Intellectual Ventures licenses to Ford Motor Company $F http://t.co/Oo86nyyVtf
FinSentS SP500
3 Mar 15 15:22:57
$F:US Ford February U.S. Sales Down 1.9% #FORD MOTOR CO http://t.co/m4evSClWQH #SP500
Tom Hochstatter
3 Mar 15 15:21:28
Intellectual Ventures licenses to Ford Motor Company $F http://t.co/Oo86nyyVtf
UNITY.
3 Mar 15 15:19:13
$F - MARKET SNAPSHOT: U.S. Stocks Retreat From Records; Car Sales Sputter http://t.co/LUIHDsmvkO
UNITY.
3 Mar 15 15:18:08
$F - U.S. Auto Sales Lose Steam in February -- 4th Update http://t.co/xfHRK4l2dS
UNITY.
3 Mar 15 15:09:04
$F - MARKET SNAPSHOT: U.S. Stocks Retreat From Records; Car Sales Sputter http://t.co/0e6QoJoDjX
UNITY.
3 Mar 15 15:05:14
$F - MARKET SNAPSHOT: U.S. Stocks Retreat From Records After Netanyahu Speech http://t.co/iQO78pNIrq
Mike Turner
3 Mar 15 15:04:54
Are These Three Auto Companies Ready to Hit the Gas? http://t.co/4qUjLRTatN #stocks $F $GM $FCAU #stocknews #turnertrends
UNITY.
3 Mar 15 15:02:11
$F - U.S. Auto Sales Lose Steam in February -- 4th Update http://t.co/csxpo6y8Gp
UNITY.
3 Mar 15 15:00:15
$F - MARKET SNAPSHOT: U.S. Stocks Retreat From Records After Netanyahu Speech http://t.co/G4x2geZhaU
Sentiquant
3 Mar 15 15:00:08
#sentishiftdown $TZA $ELON $QQQ $GE $LL $TWTR $F $NQ $MNKD $RUSS #sentiquant 20150303 18:00:08:999
Andre Tetery
3 Mar 15 14:58:00
Covered my Short $F on bad auto industry news
UNITY.
3 Mar 15 14:57:07
$F - U.S. Auto Sales Lose Steam in February -- 3rd Update http://t.co/qvgc1MPjq3
UNITY.
3 Mar 15 14:53:25
$F - MARKET SNAPSHOT: U.S. Stock Slip A Day After Nasdaq Tops 5,000 http://t.co/3qRO9i8L65
UNITY.
3 Mar 15 14:53:25
$F - U.S. Auto Sales Lose Steam in February -- 2nd Update http://t.co/et8iRE75qh
Casey
3 Mar 15 14:46:29
RT @bored2tears: Ford February sales -2%, well below consensus +5.8%. .pdf at: http://t.co/0wMMiIDKPK $F -3% at 16.07 premarket #cars
UNITY.
3 Mar 15 14:40:32
$F - MARKET SNAPSHOT: U.S. Stock Futures Signal Lower Open A Day After Nasdaq Tops 5,000 http://t.co/C52gwSAvou
NASDAQ
3 Mar 15 14:40:22
$F - MARKET SNAPSHOT: U.S. Stock Futures Signal Lower Open A Day After Nasdaq Tops 5,000 http://t.co/OouHAKYxQ6
ToddP
3 Mar 15 14:32:33
RT @CNBCnow: BREAKING: Ford US sales down 1.9% in February, well below expectation of increase of 5.2%. $F
Breaking News
3 Mar 15 14:21:03
$F: http://t.co/AXgcMLfP4i Managing Editor On February Auto Sales: http://t.co/GscNKIVzN2
James DiPlata
3 Mar 15 14:16:42
RT @RobWilliamsTV: Stocks Fall Broadly a Day after Nasdaq Passes 5,000 Mark http://t.co/B6cAs45GAx via @Newsmax_Media $VEA $VIG $VUG $VTV D…
Rob Williams
3 Mar 15 14:10:02
Stocks Fall Broadly a Day after Nasdaq Passes 5,000 Mark http://t.co/B6cAs45GAx via @Newsmax_Media $VEA $VIG $VUG $VTV DVY $BABA $F $IWM
ARK Indu Innovation
3 Mar 15 14:09:00
Bummer. #Auto sales disappointed this february. ( $F , $GM , $NSANY , $FIATY ) http://t.co/3plUuR5oQq
Traderific
3 Mar 15 13:38:16
BUY $BIDU 206.34, SELL $CELG 117.23, COVER $CHK 16.20, SELL $F 16.17. More stock tips & details at: http://t.co/2lRmoypONs
4-traders.com
3 Mar 15 13:37:04
#MARKET SNAPSHOT: U.S. Stocks Retreat From Records; Car Sales Sputter http://t.co/PHo0ic2CIx $F
StockNewsWires
3 Mar 15 13:37:02
$F: Ford Stock Set to Drive Higher: http://t.co/Eih3hdHUgl
UNITY.
3 Mar 15 13:31:39
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/ismTH2YuQs
UNITY.
3 Mar 15 13:31:38
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/eo9Vesq0pD
UNITY.
3 Mar 15 13:31:37
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/OqBBnEusRv
UNITY.
3 Mar 15 13:31:37
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/QQQXq2J39B
UNITY.
3 Mar 15 13:31:36
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/FZ37O3c1K5
UNITY.
3 Mar 15 13:31:35
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/Tu4RiAd6lD
UNITY.
3 Mar 15 13:31:35
$F - Statement of Changes in Beneficial Ownership (4) http://t.co/4XvzaL92d1
				
				
By  +Follow July 3, 2013 11:04AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.