Did wall street actually get bailed out?
I am sorry to post twice in the same day, I am sure everybody gets sick of listening to be yap, lol. It is commonly stated that wall street was bailed out, moral hazard galore gave free passes to investors and to banksters and all of that.
Tonight I was surfing some vids of various famous hedgies on youtube, and somehow wound up watching some vids about the Chrysler and GM situation. Remember, the one where US Law was flatly broken so that Obama et al could give the companies to the unions? Here are some vids:
There are alot more if you want to listen.
And then beyond that I sat down and thought about the outcome for equity investors in various banks...
Countrywide: bailed out privately by bank of america after taking big losses
Bear Stearns: for all practical purposes they were wiped out
Merril: severe damage at best, I can't remember what BAC paid for merril
Citi: for all practical purposes the crisis destroyed the equity holders. Decades to recovery at best, even after a 400% rally, they are down 90%+
BAC: severe damage and dilution, probably a decade until pre-crisis buyers are even
Wachovia: severe damage
Washington Mutual: I don't now but at best the damage was severe
MBIA, AIG, Fannie and Freddie, etc.
Investors were more or less wiped out across the board. GS, MS, WFC, USB survived I guess, but still. The net loss for someone holding a portfolio of every financial involved in the housing bubble would be ruined. So the argument that investors were bailed out holds no water on the equity side. SPECULATORS buying these things post-lehman were quite possibly bailed out, but ... at the end of the day I don't think anybody will be encouraged to buy equity in an ill behaving financial on account of the fact that the gov't will always bail them out. Stockholders got slaughtered, and dilution was forced on everybody including banks (USB, maybe WFC) that wouldn't have needed it. I know literally nothing about the bond markets so I can't comment there.
Beyond that, the bank/financial aspect of the TARP program will turn a profit for the taxpayer.
See here from a recent article on FITBs payback. From reading commentary by Bruce Berkowitz and another spot on the web, AIGs bailout should ultimately prove profitable for the taxpayer as well.
Now, TARP is still, per that article, expected to lose money. But that would fall apparently at the hands of the auto bailout. And where did the auto bailout go? To the unions.
The bailout of Fannie and Freddie I am sure will never be recovered, but, then, those are government sponsored entities and how did they lose so much moeny? Giving money to people who didn't have any to buy houses they couldn't afford?
In and among all of the rage and all of the hyperbole and all of the dramatic commentary and discussion of how banks control the world, we find...
-equity holders in financials were destroyed. at most they would have been destroyed a little bit more absent tarp. They lost ... on shares bought in the bubble and held, diversified across all of the companies, what? 80%? 70? The companies that still have share value would have survived anyway, and wouldn't have had forced dilution.
-Tarp turned out to be profitable, except a little socialistic/liberal contribution to the auto union
Those seem to be the facts: destroyed investors and profitable taxpayers. Save Fannie, Freddie, and that big contribution to the unions. Idon't know what to say about Fannie and Freddie, the big losers... I think thats maybe a point for discussion and exploration. Who were we bailing out there? Not investors. Wall Street? The world who holds the paper? How did they get in trouble in the first place?
Anyway, destroyed investors and profitable taxpayers. Never really see anybody discuss that one.