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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for F
Extreme Stocks
2 Sep 15 07:51:59
leahanne: Volume Alert - F 13.70 Ford Motor Company $F Hit http://t.co/WH3oxf54v0
leahanne
2 Sep 15 07:50:48
Volume Alert - F 13.70 Ford Motor Company $F Hit a high today of 13.99 Closing the day 10:30 at 13.70 -0.02 -0 http://t.co/MwQl17XUWe
Young Research
2 Sep 15 07:48:33
Auto Sales Surge http://t.co/KMBXbgn68y $F $GM $VLKAY $TM $HMC $TSLA $FIATY http://t.co/UvaEssi31A
Jeremy Jones, CFA
2 Sep 15 07:48:32
Auto Sales Surge http://t.co/xv8e8jD3GQ $F $GM $VLKAY $TM $HMC $TSLA $FIATY http://t.co/ro2sZU8pnF
TalkMarkets
2 Sep 15 07:39:03
Beverly, Hills That Is - Market Review @MonsoonWM $GE $GM $F $TM $FCAU http://t.co/xnRxiMrPJ3
MyAllies Trading
2 Sep 15 07:35:42
$F Ford Inspires Tomorrow's Leaders Today with New Global Grant, Innovative Employee Civic Leadership Progr... http://t.co/Cvn9OLSvgf
Bradley
2 Sep 15 07:31:50
$RSX $XOM $X $T $F September 2nd, 2015 Watch List - Update from Option Millionaires - Stock Options Chatroom Marke... http://t.co/crRZoRm31G
UNITY.
2 Sep 15 07:31:04
$F - Ford Inspires Tomorrow’s Leaders Today with New Global Grant, Innovative Employee Civic Leadership http://t.co/B5ZJJtEl9M
yahyatuts
2 Sep 15 07:31:03
$F - Ford Inspires Tomorrow’s Leaders Today with New Global Grant, Innovative Employee Civic Leadership http://t.co/Bieb6mEFR4
FinSentS SP500
2 Sep 15 07:15:43
$F:US Ford and Fiat-Chrysler post surprising sales gains in August #FORD MOTOR CO http://t.co/RpvQmusXEG #SP500
Talfryn Taylor
2 Sep 15 07:01:19
Ford Motor All Set To Tap The Mid-Sized Trucks Segment Following General Motors - http://t.co/WIwJiZhKNg - $F $GM http://t.co/7G4RrYQU2P
BusinessFinanceNews
2 Sep 15 06:59:58
Ford Motor All Set To Tap The Mid-Sized Trucks Segment Following General Motors - http://t.co/ubtErVdHBo - $F $GM http://t.co/q0CXPM3kZp
S.R.S
2 Sep 15 06:57:34
#stocks Watching - $F showing strong sales. Undervalued at this point. #investing
Oil Gas
2 Sep 15 06:49:59
RT @StockTradePicks: $ANFI huge bounce play like $ACI. 100%+ upside potential P/E of 3 $GE $F $HON $TMO $BAX $ALL investors read http://t.c…
DailyStockPicks
2 Sep 15 06:47:49
$ANFI huge bounce play like $ACI. 100%+ upside potential P/E of 3 $GE $F $HON $TMO $BAX $ALL investors read http://t.co/L1jwUV6Bag
Buck
2 Sep 15 06:31:59
$GS $V $ERX $XIV $F September 2nd, 2015 Watch List - Update from Option Millionaires - Stock Options Chatroom Mar... http://t.co/k06w3t2YsA
Jason A. Moser
2 Sep 15 06:31:02
Many thanks to @TedBrittFord for the sweet deal on my silly new Ford Explorer. Outstanding service all the way around! $F
Jeffrey Carter
2 Sep 15 06:28:45
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
Eric Scott Hunsader
2 Sep 15 06:28:12
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
MarketSnacks
2 Sep 15 06:25:18
$MCD reveals #alldaybreakfast, Canada & China's painful econ data, US #carsales $F $TM in August best since 2003 http://t.co/whzzsvpVq5
Alejandro Aguirre
2 Sep 15 06:24:23
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
Dan Hecht
2 Sep 15 06:23:47
Have $NFLX $TSLA $BX $F from yesterday
Stock Market Picks
2 Sep 15 06:23:11
$ABX $AIG $BBY $DAL $EMC $F $FCX $GLW $MGM $USB Long and short positions, the easy way to trade #stocks http://t.co/YIh32X4aoT $DIA $QQQ
Stock Trade Alerts
2 Sep 15 06:21:36
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
HumbleBioTrader
2 Sep 15 06:20:20
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
10xBagger,CFA
2 Sep 15 06:20:09
RT @TripleDTrader: Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
Dennis Dick
2 Sep 15 06:19:40
Notable opening imbalances: $BAC +677K, $WFC +174K, $PFE +144K, $JPM +115K, $TWTR +53K, $F +197K, $T +195K, $GE +139K
Cantlon Financial
2 Sep 15 06:16:55
Good news from $F Ford. The new F-150 is also doing great! http://t.co/cSZ1m1zYkB
AerobotDave
2 Sep 15 06:06:07
SelectUSA: Don't miss your chance to make history with AerospaceStates and us at the *1st ever* Natl #Aerospace $F… http://t.co/cEN19sTI5v
Danny Habbyshaw
2 Sep 15 06:02:58
$JNUG $DUST $GM $F September 2nd, 2015 Watch List - Update from Option Millionaires - Stock Options Chatroom Marke... http://t.co/hxQrCHl1xh
Sweet Platform
2 Sep 15 05:55:20
F Top news - Sep 2nd, 2015 $F http://t.co/MLrSajDrZQ
Brad Ginesin
2 Sep 15 05:54:09
Perhaps it's a cyclical top, but $F should handily exceed 2H numbers. Stock reflects a lot of economic skepticism.
Peter Valdes-Dapena
2 Sep 15 05:52:31
RT @CNNMoney: While stocks were tanking, @Ford was zooming higher thanks to strong auto sales http://t.co/pqCeY9poRQ $F http://t.co/3KyiKoW…
CNNMoney Investing
2 Sep 15 05:48:05
Take that @realDonaldTrump? People love @Ford cars: http://t.co/SpXCgVQYrZ $F via @LaMonicaBuzz http://t.co/NlB5A6kU0f
Jason Olive
2 Sep 15 05:47:26
RT @SeekingAlpha: Where Does Alcoa Stand After A Very Difficult Year? http://t.co/tuSxVb4Nqq $F #FORD #CARS $AA
Austin Forex Insight
2 Sep 15 05:44:10
RT @SeekingAlpha: Where Does Alcoa Stand After A Very Difficult Year? http://t.co/tuSxVb4Nqq $F #FORD #CARS $AA
Mark Friederichs
2 Sep 15 05:43:24
$F can't build enough trucks to sell, #construction #spending up 13%, #GDP & #productivity beating expectations now clarity from the #Fed ?
Quantpost $F
2 Sep 15 05:40:07
$F News: "Where Does Alcoa Stand After A Very Difficult Year? $F #FORD #CARS $AA" http://t.co/s6xtLDNua1 Analyze: https://t.co/6E6gSfhrQc
Quantpost Basic Mats
2 Sep 15 05:40:07
$AA News: "Where Does Alcoa Stand After A Very Difficult Year? $F #FORD #CARS $AA" http://t.co/CckWP74irC Analyze: https://t.co/7cyvCgpVXi
Quantpost Cnsmr Good
2 Sep 15 05:40:07
$F News: "Where Does Alcoa Stand After A Very Difficult Year? $F #FORD #CARS $AA" http://t.co/auA3dutCg6 Analyze: https://t.co/aeJZqyhLdx
Long & Short Ideas
2 Sep 15 05:40:06
Where Does Alcoa Stand After A Very Difficult Year? http://t.co/1wzzgMr7Dg $F #FORD #CARS $AA
Seeking Alpha
2 Sep 15 05:40:06
Where Does Alcoa Stand After A Very Difficult Year? http://t.co/tuSxVb4Nqq $F #FORD #CARS $AA
Bradley
2 Sep 15 05:33:45
$RSX $XOM $X $T $F Wednesday’s Market Outlook Video – $FCX $JPM $MSFT $LNKD $BIDU $SPY $IWM http://t.co/eQD6WTgVda
Buck
2 Sep 15 05:33:06
$GS $V $ERX $XIV $F Wednesday’s Market Outlook Video – $FCX $JPM $MSFT $LNKD $BIDU $SPY $IWM http://t.co/pAVgkruDPQ
DJ Olive
2 Sep 15 05:29:16
RT @MarketCurrents: F-Series momentum starts to kick in for Ford http://t.co/u0KTBMeYWe #premarket $F
Andrew Brandt
2 Sep 15 05:27:02
U.S. auto sales pace accelerated in August despite Labor Day shift http://t.co/QHPcpAaBrh via @WSJ @Ford $F
Rover Radar
2 Sep 15 05:26:46
RT @SeekingAlpha: General Motors At Risk As Obama Administration Puts Politics Before (Free Market) Profits http://t.co/euN2kLsuH7 $F #FORD…
Dathan Pyle
2 Sep 15 05:13:12
Ford ( $F ) upgraded to STRONG BUY. PT suggests 31.19% upside. http://t.co/3pLbKtxhFx
Binary Option
2 Sep 15 05:10:54
RT @MarketCurrents: F-Series momentum starts to kick in for Ford http://t.co/u0KTBMeYWe #premarket $F
Chris C. Courtney
2 Sep 15 05:10:03
RT @MarketCurrents: F-Series momentum starts to kick in for Ford http://t.co/u0KTBMeYWe #premarket $F
				
				
By  +Follow July 3, 2013 11:04AM
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