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About those TARP "profits..."

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iamse7en posted on Fri, Dec 17 2010 2:28 PM

I've tried to understand the bailouts, and I recently have been reading about those TARP "profits." I wrote the following explanation to a friend. Is this accurate? Am I missing anything? What other information would you give to clarify my points or to explain what really happened? Thank you.

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...about the myth of TARP "profits," it seems this is what happened:

We know that "the bailout" is really bailouts, because there were a number of programs enacted by the Treasury, FDIC, and the Fed. Here is the tally of all recovery programs (that we know of, because we discover the Fed did a lot more secret bailouts, and they've only revealed a portion) for each institution involved. So here's how it worked. The Treasury gave TARP money to banks. (It was originally supposed to be used to buy toxic assets, but was changed to just be a simple handout.) The Federal Reserve created money, and used that money to buy these toxic assets from the banks (not at true market value of course, and it was a BOATLOAD of money), and then the banks used some of that money to "pay back" TARP. Then, Geithner calls himself a genius for bailing out the banks, at a profit.

Of course, the cost of the bailout is only converted into inflation, severe capital distortion, and other unseen costs.

If you want an example of how this worked for Goldman, read this fascinating report. It's a silly, rigged, casino game. And of course the banks are bringing in near-record profits this year. Not bad for an industry that almost completely collapsed a couple years ago. Geithner clearly isn't the only genius of the bunch.

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iamse7en replied on Mon, Dec 20 2010 11:48 PM

BUMP!

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