“…assistance to banks, once thought to cost the taxpayers untold billions,

 TARP FUNDS are on track to actually reap billions in profit for the taxpaying public.”

“We now expect a positive return from the government's investments in banks.”

Treasury Secretary Timothy Geithner, December 9, 2009

 Speech at the Brookings Institute, December 8, 2009

    There is a great deal of misunderstanding about the cost of government programs that relate to banks. In fact, every program involving banks will result in a profit to the taxpayers. It has been the assistance to non-banks – GM and Chrysler, Fannie Mae and Freddie Mac, and AIG – that are likely to cause losses, not assistance to banks. The bank programs – Treasury’s Bank-TARP program, FDIC’s debt guarantee program, and the Federal Reserve’s liquidity facilities – will all make money.

                  

TARP – Expected Profit of At Least $19 Billion

     “Every one of its programs aimed at stabilizing the banking system…will earn a profit thanks to dividends, interest, early repayments, and the sale of warrants.” – U.S. Treasury press release, Dec. 9, 2009. According to the Treasury, these bank programs: “that were initially projected to cost $76 billion are now projected to bring a profit of $19 billion.” Treasury also said that: “profits could be considerably higher as Treasury sells additional warrants in weeks ahead.” Taxpayers have already earned a significant return – averaging 14 percent – on the bank TARP investments that have been repaid to Treasury. Treasury also earned $1.2 billion in fees – with no losses – on its Money Market Fund Guarantee Program.3

 FDIC’s Debt Guarantee Program – Revenue Over $9.4 Billion

     The FDIC – through its Temporary Liquidity Guarantee Program (TLGP) – guaranteed debt issued by banks (for up to three years duration), charging a fee for the service. “The TLGP program has been a moneymaker for us," FDIC chairman Sheila Bair said in May 2009 in Senate testimony. “We've collected over $7 billion in payments from it, and we've had no losses.”4 As of December 31, 2009, the total revenues collected were $9.476 billion (not including additional surcharges that help support the FDIC’s deposit insurance fund). No new debt can be issued under the program, which closed on October 31, 2009. The FDIC programs, including deposit insurance, are fully the responsibility of the banking industry with no taxpayer money or expenses involved.

 Federal Reserve Programs – Record Profits of Over $52 billion in 2009

     The Federal Reserve has transferred to Treasury $46.1 billion of net income on its record profit of $52.1 billion last year. It marks the biggest profit on record dating back to 1914 when the Fed was created. Of the net income to Treasury, the Fed noted that “$2.9 billion in earnings on loans extended to depository institutions, primary dealers, and others” with additional profits coming from its LLC investment that facilitated JPMorgan Chase’s acquisition of  Bear Stearns.5 The remaining profits were from open-market operations which includes the purchase of GSE debt.