TARP

This story from Bloomberg reporters Yalman Onaran and Alexis Leondis is making the rounds in the blogosphere today.  According to an analysis conducted by Bloomberg...

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than they could have made buying 30-year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit.

But as the story also notes, "Democrats are struggling to turn those gains into political capital..."

Over at CNBC.com, John Carney says TARP II is coming.  In fact, he seems to thinks its almost guaranteed.

I seriously doubt there would be 10 votes out of the 535 in the House and Senate in favor of another bank bailout bill.  Actually, I'm not sure it would even make it out of committee in either house.

Anyone know if you can buy TARP II futures?

Friday, the Internal Revenue Service suspended the present law Section 382 denial of loss deductions in the event of a "takeover" of a financial institution by Treasury via its investment of TARP funds. This will allow Citigroup to keep $38 b. of loss deductions.  A Treasury spokesman said Section 382 was never intended to take away losses when the takeover was by the government. True enough. Section 382 was intended to stop corporate raiders from taking over unprofitable firms just for their tax deductions of in the 1980’s. Nonetheless, this is a back door way for Treasury to capitalize financial institutions. It just goes to show, that when circumstances change dramatically, the law changes with them.  This morning’s Washington Post article lays it all out.

Elizabeth Warren -- I feel your pain.

It was just about a month ago that Bruce noted that the health care bill then being considered by the Senate was close to 2000 pages long and that those who insisted members of Congress read every page didn't understand how bill drafting worked (I'm being kind here but just work with me).

Those of you who were critical of that bill because of its length seem to forget that you similarly criticized TARP for being too short.  The original version of TARP drafted by Bush Treasury Secretary Hank Paulson that was sent to Capital Hill was slightly less than 3 pages using what I think was 14 point type and at least double spacing. 

And it was projected to cost about $233 billion per page, that is, $700 billion and  said the little more than "Give us the money get out of our face."

As enacted, TARP was more than 10 times longer than what Paulson requested, largely because it added a number of oversight procedures and triggers.  The total cost was the same but the cost-per-page fell to around $17 billion.