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

By  +Follow July 3, 2013 11:04AM
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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.


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Results for F
Zachary Shrier
24 Oct 14 15:34:43
@Michael_Khouw $F management knows that Lincoln is a problem. At least Mulally did.
Michael C. Khouw
24 Oct 14 15:31:47
Saw bullish bets in $F today but I'm in a new Lincoln En route to the airport. whoever designed the radio controls should be dismissed.
OTPicks.com
24 Oct 14 15:04:33
http://t.co/UUQeeS6eNk ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/0V4SqjAarL http://t.co/UUQeeS6eNk
OTPicks.com
24 Oct 14 15:04:33
http://t.co/UUQeeS6eNk ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/07lLR430k2 http://t.co/UUQeeS6eNk
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24 Oct 14 15:01:23
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OTPicks.com
24 Oct 14 14:55:24
ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/07lLR430k2
Texas_Stella
24 Oct 14 14:47:17
RT @GotSanctuary: Ford $F picks Mexico over Windsor, Ontario for engine plant
On Time Picks
24 Oct 14 14:43:23
http://t.co/ZO8wg1ovu2 ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/OwYBAATwcB http://t.co/ZO8wg1ovu2
AlertPennyStocks.com
24 Oct 14 14:43:21
http://t.co/MHpRaxDgHe ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/JLtvM47i0W http://t.co/MHpRaxDgHe
BNK Invest
24 Oct 14 14:39:39
Video: Weekly Market Wrap: October 24, 2014 $DRYS $F $MSFT $AAPL $TWC $V $TROW $MCK $MCK #stocks http://t.co/vhoc4pmIC1
Michael C.Bazarewsky
24 Oct 14 14:34:40
as a $F shareholder, let me say "yay" to the Lincoln thing. HAS to be more than just relabelled Ford.
Stefano
24 Oct 14 14:33:30
@jimcramer will you comment on $F earnings tonight? Like the story behind the stock but need your input
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Penny Detective
24 Oct 14 14:22:51
http://t.co/od3fqlbMNB ClayTrader: * * $F Video Chart 10-24-14 * *: ClayTrader http://t.co/TEQv5u13oE
Exposethebest
24 Oct 14 14:19:29
ClayTrader: * * $F Video Chart 10-24-14 * * http://t.co/mTLITV2TZd
hotpennystockalert
24 Oct 14 14:19:24
ClayTrader: * * $F Video Chart 10-24-14 * * http://t.co/FVaA2BL1m5
hotpennystockalert
24 Oct 14 14:18:52
ClayTrader: * * $F Video Chart 10-24-14 * * http://t.co/e18Mv2gKUT
kenr0966
24 Oct 14 14:16:44
RT @ClayTrader25: $F Stock Chart Analysis_ 10-24-14 - watch here: http://t.co/ZL6NZG7K3H #stock #stocks #stocktrading
4-traders.com
24 Oct 14 14:15:07
Exclusive: Ford to overhaul Lincoln brand, this time with big bucks http://t.co/SzMu6gDmwK $BMW $F $DAI $GM $PIH-M $MLTEA $HIS $MKS
ClayTrader
24 Oct 14 14:14:23
$F Stock Chart Analysis_ 10-24-14 - watch here: http://t.co/ZL6NZG7K3H #stock #stocks #stocktrading
NewsEdge
24 Oct 14 14:07:03
Today's big #market movers were @Ford $F, @amazon $AMZN, @ProcterGamble $PG & @pandora_radio $P. http://t.co/HNSGV825FH
faweiz
24 Oct 14 14:06:28
Ford CEO: We’ve Driven The Tesla Model S, Torn It Apart, And Put It Back Together $TSLA $F http://t.co/6X4pN9jg1d
$F Rob
24 Oct 14 14:01:24
What's free time?!?!? $F
MarketWatch $F
24 Oct 14 14:00:56
Amazon, Pandora sink in wake of results; KLA-Tencor surges http://t.co/D2MfRMX2lt $F
GotSanctuary
24 Oct 14 13:59:08
Ford $F picks Mexico over Windsor, Ontario for engine plant
Chasing Stars
24 Oct 14 13:47:43
$F Ideas Click Here: http://t.co/Z36Eo7Mfuq Also See: $FVI.TO $EPGL $GDXJ $IRBT ~
Rick Strickler
24 Oct 14 13:39:15
RT @Lebeaucarnews: $F's Q3 "Pit Stop" and F-Series questions http://t.co/nDJWEmuFNH
Forex News & Tips
24 Oct 14 13:37:32
RT @daily_finance: Ford 3Q #earnings lower, but still beat street estimates http://t.co/U2z2XQV5v6 $F $GM
Stock Forums
24 Oct 14 13:36:51
$F Day Low Click Here: http://t.co/zn6He0udCu Also See: $MCD $XLK $SPXL $HAS ~
Investors Hangout
24 Oct 14 13:35:54
$F Day Low Click Here: http://t.co/VuCMJBPbKO Also See: $DDD $CAT $AMBA $WMT ~
John Ross
24 Oct 14 13:35:45
$F That new CEO sure is stellar!!!! *sarcasm*
baudwalk
24 Oct 14 13:31:39
$F Just added to position. Oversold. PE bargain. Stabilize overseas economies, and we'll be good to go.
Investors Hangout
24 Oct 14 13:30:32
$F E.P.S. Click Here: http://t.co/hULR35D4Ux Also See: $GMCR $TLT $EXK $INTC ~
INVEX Banco
24 Oct 14 13:30:20
Títulos de $F bajaron hasta 4%; reporte del 3T mostró menores ingresos
DailyFinance
24 Oct 14 13:30:14
Ford 3Q #earnings lower, but still beat street estimates http://t.co/U2z2XQV5v6 $F $GM
Phil LeBeau
24 Oct 14 13:29:56
$F's Q3 "Pit Stop" and F-Series questions http://t.co/nDJWEmuFNH
Leilani Pips
24 Oct 14 13:26:44
EARNINGS CALL-9/11 $YHOO C $AAPL C $CMG P $ANGI P $GSK P $MCD P $AMZN P $SWFT C $F P WRONG $NFLX $YELP
The Fly
24 Oct 14 13:20:30
On The Fly: Closing Wrap $AMZN $PG $F $KLAC $SODA $PEP $JNPR: Full Story http://t.co/ChEzNOLgQ6
Zonebourse News
24 Oct 14 13:20:17
Wall Street finit en hausse avec Microsoft et Procter http://t.co/wUjGY7S5Za $F $PG $AMZN $MSFT $SODA $COMP $NDX $S500 $CPWW $PEP
ajaygolmalgobisharma
24 Oct 14 13:14:26
RT @LaMonicaBuzz: @Ford: We project gas prices to rise in the long run. Our new F-150 will be the most fuel-efficient yet. $F #FordEarnings…
Tejas D A.
24 Oct 14 13:14:01
$F Beat on Rev. & EPS. This is last time we see this below $15.. All in for long term..
Paul R. La Monica
24 Oct 14 13:12:52
.@Ford Thanks! Love that $F CFO Bob Shanks is using @StockTwits to answer questions from individual traders & reporters. Good stuff.
Paul R. La Monica
24 Oct 14 13:10:53
@Ford: We project gas prices to rise in the long run. Our new F-150 will be the most fuel-efficient yet. $F #FordEarnings ^Bob"
diva
24 Oct 14 13:09:07
“@VizzyMasters: @CristinaBaaby $F.” Shit somewhere. I'm over San Diego.
Zacks.com
24 Oct 14 13:08:53
"@Ford: @CalMustang (2/2) Projecting global sales to triple by 2020. #FordEarnings $F ^Bob"
Tim Ferguson
24 Oct 14 13:05:03
#Ivy Asset Strategy Fund made ill-timed buy into $F-ord stock.
groovegod.
24 Oct 14 13:04:37
@CristinaBaaby $F.
Matt Fanning
24 Oct 14 13:01:51
#FVAM Fund: #ontheday Best: $CBI (core-long, decr) +37bps Book: 10% Worst: $F (core-long) -36bps Book: 5% #fundaction (+) #buytheblood
Jefferson Humber
24 Oct 14 13:01:31
Long $F (1/2 size position) cc @murphyrosecliff
Zacks.com
24 Oct 14 12:59:02
.@Ford beat our earnings and revenues estimates this morning. Read our recap! $F http://t.co/05LgVkG5W0
				
				
By  +Follow July 3, 2013 11:04AM
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