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.

Results for F
StockConsultant.com
16 Apr 14 06:01:08
$F back to 15.68 strong triple+ support area >> http://t.co/QWHjbR9q8b http://t.co/rix1569Uww
Mitchell Warren
16 Apr 14 06:00:52
4/15/2014 Bullish setup in Ford Motor ahead of earnings next week http://t.co/YZaHSBq7VI $F
Esmeralda
16 Apr 14 06:00:40
RT @Freudf8: ☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
Ptichag918
16 Apr 14 06:00:10
RT @Freudf8: ☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
Theresa
16 Apr 14 05:59:17
RT @Freudf8: ☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
Liokm31814
16 Apr 14 05:58:54
RT @Freudf8: ☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
Ashley
16 Apr 14 05:58:36
RT @Freudf8: ☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
Freudf8
16 Apr 14 05:58:12
☯Gain Followers ☯RT This ☯MUST FOLLOW ME I FOLLOW BACK ☯Follow everyone who rts ☯Gain #ONEDIRECTION #kca #faceofmlb $f(
TradersTopNews
16 Apr 14 05:56:05
$F Ford hints at new infotainment system http://t.co/OSxu1fKHqX
TKOSTOCK$
16 Apr 14 05:43:24
Maserati Said to Weigh New Sports Car After Orders Triple http://t.co/H4LG0enfM9 via @BloombergNews $F $GM $TSLA $TM #TRIPLE #TKOSTOCKS
Vladimir ggfinances
16 Apr 14 05:42:52
This makes sance http://t.co/jpkfmJLpcI follow it and dont lose money $AAPL $FB $ZNGA $TSLA $BAC $C $F
Ernst Grosz
16 Apr 14 05:37:08
$F: [video] BMW unveils M4 convertible http://t.co/6byVYYb2IH
Will Ragan
16 Apr 14 05:32:28
RT @SeekingAlpha: Why I Bought More Ford Yesterday http://t.co/jyEPOZMSZM $AA $F
Mike Ninov
16 Apr 14 05:29:29
Top 10 Active #NYSE $UMC $ALU $GFI $ING $F $BAC $AV $VOD $RIO $FB
Ricardo
16 Apr 14 05:28:11
RT @SeekingAlpha: Why I Bought More Ford Yesterday http://t.co/jyEPOZMSZM $AA $F
Patrick Cowher
16 Apr 14 05:27:05
$F [video] BMW unveils M4 convertible http://t.co/dNwmvta4dX
Dan Monk
16 Apr 14 05:26:00
Watching retail sales in China http://t.co/bQUjmdJpF4 $YUM $WHR $AVP $F // could be good news for $PG
TradingMyway
16 Apr 14 05:25:33
RT @SeekingAlpha: Ford Offers 33% Upside And Just Flashed The Buy Sign http://t.co/gIWLKmvKlj $F #FORD #CARS
Stock Herald
16 Apr 14 05:24:16
$F: [video] BMW unveils M4 convertible http://t.co/f8xQ7mBqj6
Quantpost Cnsmr Good
16 Apr 14 05:22:54
$F News Alert: http://t.co/6so8emsCym Updated options view: https://t.co/OLgPB0Ifwh All options views: https://t.co/xAQ6t4CUsS
Seeking Alpha
16 Apr 14 05:22:53
Ford Offers 33% Upside And Just Flashed The Buy Sign http://t.co/gIWLKmvKlj $F #FORD #CARS
Quantpost Cnsmr Good
16 Apr 14 05:18:26
$F News Alert: http://t.co/Ijk3nNIIUD Updated options view: https://t.co/4U6HiYmF32 All options views: https://t.co/xAQ6t4CUsS
MarketCurrents
16 Apr 14 05:18:25
Watching retail sales in China http://t.co/UyqRc06ZRV #premarket $YUM $WHR $AVP $F
Quantpost Cnsmr Good
16 Apr 14 05:18:00
$F News Alert: http://t.co/QSi2eNrdC4 Updated options view: https://t.co/XJ2bohCt3J All options views: https://t.co/xAQ6t4CUsS
Seeking Alpha
16 Apr 14 05:17:59
Why I Bought More Ford Yesterday http://t.co/jyEPOZMSZM $AA $F
Sh_Tanha
16 Apr 14 05:15:21
On apnadaman_urdu $G$ SIRF $ TUM $F$
TradersTopNews
16 Apr 14 05:04:22
$F [$$] Ford to Overhaul Infotainment System http://t.co/GZ2UmCp1jb
Rahul Sharma
16 Apr 14 05:02:26
Mild rebound in China retail sales in March +12.2% y/y; led by strength in big ticket items: cars, appliances & furniture $F $GM $WHR $$
Informer
16 Apr 14 04:56:07
$F: Ford could replace MyFord Touch, Detroit News says http://t.co/XEtV27yVLR
Patrick Cowher
16 Apr 14 04:52:37
$F [video] Tesla's last day in New Jersey http://t.co/jLt0HJE16T
Patrick Cowher
16 Apr 14 04:46:36
$F [video] GM very cheap: Nygren http://t.co/NgwQCuBl4v
Patrick Cowher
16 Apr 14 04:41:07
$F Europe Is Looking Brighter for Ford Motor Company http://t.co/a8grLUAYXI
TradersTopNews
16 Apr 14 04:41:06
$F Ford's new My Touch with BlackBerry software slated for year end, WSJ says http://t.co/BjKOh5WNpJ
StockNews24
16 Apr 14 04:36:26
$F - Ford could replace MyFord Touch, Detroit News says -> http://t.co/f9HceFzaN6 #stock #stocks #stockaction
Patrick Cowher
16 Apr 14 04:35:08
$F Why the 2015 Lexus NX SUV Is Huge for Toyota Motor Corporation http://t.co/rr82kTeAEy
TradersTopNews
16 Apr 14 04:30:18
$F [video] Mercedes CEO: Fighting for every car http://t.co/vCAUCxPHg4
Patrick Cowher
16 Apr 14 04:30:08
$F [video] Mercedes CEO: Fighting for every car http://t.co/r1QumN1eRD
Patrick Cowher
16 Apr 14 04:30:08
$F Ford Sees Progress With In-car Technology Systems, Hinrichs Says http://t.co/XMWm7XRt7t
Patrick Cowher
16 Apr 14 04:30:07
$F Ignace Proot, the Senior Analyst Covering U.S. Metals & Mining for Sanford C. Bernstein & Co., LLC: Auto Manufacturing Increase in...
Chris
16 Apr 14 04:28:43
Ford is going to start using #blackberry tech in cars instead of #Microsoft $MSFT $F $BBY
TradersTopNews
16 Apr 14 04:24:08
$F Ford Sees Progress With In-car Technology Systems, Hinrichs Says http://t.co/03iOZ1sBzw
TradersTopNews
16 Apr 14 04:24:08
$F General Electric CEO Rumors Hit Ahead of Earnings Report http://t.co/PvhccCsnJd
Patrick Cowher
16 Apr 14 04:24:04
$F Ford could replace MyFord Touch, Detroit News says http://t.co/MH5PJXrC6W
TradersTopNews
16 Apr 14 04:18:46
$F Ignace Proot, the Senior Analyst Covering U.S. Metals & Mining for Sanford C. Bernstein & Co., LLC: Auto Manufacturing Increase in...
TradersTopNews
16 Apr 14 04:18:45
$F Why the 2015 Lexus NX SUV Is Huge for Toyota Motor Corporation http://t.co/EgoVM0cLEL
Patrick Cowher
16 Apr 14 04:18:04
$F Ford's new My Touch with BlackBerry software slated for year end, WSJ says http://t.co/rMgqADwnS5
Patrick Cowher
16 Apr 14 04:06:35
$F [$$] Ford to Overhaul Infotainment System http://t.co/zCG5mZruav
TradersTopNews
16 Apr 14 03:55:08
$F Europe Is Looking Brighter for Ford Motor Company http://t.co/6DTTevjpoP
Patrick Cowher
16 Apr 14 03:39:33
$F Ford hints at new infotainment system http://t.co/2DLkK6BiIU
TradersTopNews
16 Apr 14 03:33:42
$F [video] GM very cheap: Nygren http://t.co/4raNi8Qp5z
				
				
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.