Monday, March 9, 2009

TARP Has Lost 40% Since Inception

Or Zombie Banks 1, Taxpayers 0.

In reality was looking for a minus infinity symbol but blogspot is woefully inadequate when expressing involuntary taxpayer performance. The latest shock to the U.S. taxpayer came last Friday when the Ethisphere TARP index recorded a $21 billion drop in value. The TARP Index, created by the Ethisphere Institute, tracks the U.S. Federal Government's return under its TARP investments. Out of the $306.1 billion so far handed out under TARP since its inception, there has been an unrealized loss of $123 billion, compliments mostly of the big 4: C, BAC, WFC and JPM. In other words, the U.S. Government (and its taxpaying funders) has lost over 40% of their investment. This translates into a loss of $1,082 per every US household, roughly double the proposed stimulus tax credit.

Hank Paulson and Bush's administration have already received earfuls for failing to ensure the initial $350 billion of funds was spent properly, as critics point out such wasteful transgressions as Citi's $8 billion loan to Duai's government, JPM's $1 billion investment in India, and Bank of America's $7 billion investment in China Construction Bank Corp.
“This past week marked the largest downward slide of the Ethisphere TARP Index since its creation, losing just under $21 billion in value. Ethisphere estimates that more than a third of the TARP companies have lost at least 25 percent of their value to date," said Stefan Linssen, Managing Editor of Ethisphere Magazine and one of the lead research analysts behind the Ethisphere TARP Index. “More rumors surfaced that Bank of America would take the path of Citigroup and have the Treasury convert a substantial amount of its preferred shares to common stock, though CEO Ken Lewis continues to adamantly deny that the bank will need any more infusion of capital of any kind. Aside from Citigroup, Ethisphere estimates that the rest of the calamity investments were relatively stable this past week.”
And just so taxpayers know who to direct their righteous indignation at, here are the winners and losers, or zombie banks as the latter are better known.

The largest estimated losses to date under TARP are:
1. Citigroup (C) – with an estimated loss of $35.9 billion
2. Wells Fargo (WFC) – with an estimated loss of $12.5 billion
3. Bank of America (BAC) – with an estimated loss of $11.3 billion
4. JP Morgan (JPM) – with an estimated loss of $6.3 billion

The largest estimated gains to date under TARP are:
1. Great Southern Bancorp (GSBC) – with an estimated gain of $11.1 million
2. Community Bankers Trust Corp (BTC) – with an estimated gain of $2.0 million
3. First Citizens Banc Corp (FCZA) – with an estimated gain of $1.5 million
Sphere: Related Content
Print this post


Advant Guard said...

I am confused by the statement that the government has lost money. It is true that some of the TARP investment was converted to common in Citibank. But for the other banks, the investment is still in preferred stocks, which may be worthless but more likely will be paid off in full. Just how do they estimate the loss on senior preferred in Well Fargo, given there is no market in these shares?

S said...

the greatest scam going is the fdic backed debt. I wonder if the interest differential (market for bank vs. treasury) is tallied in that supposed 8T that has been lent or guaranteed thus far? banks are cramming down equity holders by piling into the fdic backed debt as a means of extorting the governemnt and taxholders to keep them alive. Kind of the AIG strategy out in the open. This is an utter disgrace and yet not a story to be told.

Anonymous said...

It appears this blog is written by an investment novice who thinks investments always go up in value immediately after purchase.

Older hands know better.

Tertium Quid said...

Why the outrage? TARP investments were destinted to go down in value, because it was buying distressed assets (or shares of stock for distressed companies) that no one in the world was willing to buy, probably at any price. What's the value of something nobody is willing or able to buy? Zero.

Now the government has them - all of a sudden they're worth something?

I know the mantra rolling around the MSM when TARP was being passed was "the taxpayers will get their money back". That was an out-and-out lie and they knew it, and you should have known it, too. They had to give good money for bad assets, assets that may never be worth much of anything.

TARP was based on the fiction that anything in finance or real estate last year was really worth anything near their going market prices. The fatal correction is finally upon us, and we taxpayers are the ones left holding the bag.

...and "we" keep pouring money into the economy. Goodie.