Gone, but Not Forgotten

by Gerri Willis

$133 billion.

That’s how much taxpayers are still owed from the bailouts three and a half years after the money started pouring out of Washington.

That’s according to Christy Romero, the acting Special Inspector General for TARP.

Back in September of 2008, at the height of the financial crisis, Congress authorized $700 billion for the bailout of financial companies.

The good news: less than $414 billion was paid out.

The bad news: the government has only recovered $318 billion.

And it gets worse. Some bailout programs, such as efforts to help homeowners avoid foreclosure, will last another five years costing an additional $51 billion!

Now, when you hear the word TARP, Troubled Asset Relief Program, most people think of bank bailouts, and keeping those "too-big-to-fail" institutions afloat.

That was a big part of it, but that's not what's keeping us down.

According to Romero, the initial bank bailout program "morphed" into 13 other bailout programs including a massive bailout of the auto industry.

While there are hundreds of companies and organizations yet to pay back the taxpayer, GM, AIG and Ally financial have the biggest chunk of your money.

And don't expect to see it anytime soon.

Here’s why:

Let’s start with GM: they got $49.5 billion in TARP money. As a result, we the people own about a third of the company or roughly 500 million shares.

Just to break even, forget about making a profit, just to break even the treasury would need to sell those shares at $52.39 a share - factoring in dividends and interest.

GM’s stock today is less than half that amount!

And it's been hugely volatile over the last year. In December, the stock hit a new low of $19.

Then there's good ole AIG. The insurer got about $68 billion from TARP, but according to reports, the company was actually given about $182 billion in total from both the Treasury and the Federal Reserve.

That comes out to us owning three-quarters of this company.

We’ll break even if the government can sell it's 1.5 billion shares at $28.73 a share.

But AIG has been trading well below that level for a while now.

Plus, because of the enormous amount of shares we own, flooding the market will likely drive the price even lower.

In other words, don't hold your breath.

Finally, Ally financial: once the GM financial arm called GMAC.

TARP invested more than $17 billion in this bank - again a 74% stake.

As for selling that stake, that's going to prove difficult since Ally is not publicly traded!!

This doesn't even include Chrysler or Fannie and Freddie.

Bottom line - Bank of America and the other big banks may have paid back the bailout with interest, but TARP is far from being over.

And with this President's love of big government, I expect the problem to just grow over the next few years.

It's time Washington let the free market work, and stop playing fast and loose with my money since we obviously don't have a good plan on how to get it back!

Pension Tension Across the U.S.

by Gerri Willis

Speaker of the Ohio House William G. Batchelder (R-Medina).A big victory for unions in Ohio will likely mean a major problem for taxpayers. Ohio voters are defeating a new law limiting collective bargaining abilities. The law - which hadn't yet taken effect - was thrown out. That means current union rules will stand until the state legislature comes up with another plan.

Republican Governor John Kasich traveled the state to promote the law which set new minimum contributions for public employee health care and retirement - among other things.

It was a way for local governments - and therefore all taxpayers - to save money. And jobs.

Here's why: State and local government pension funds are between one and four trillion dollars under-funded! So if the SmartMoney number of four trillion dollars is correct, each of the more than 112 million American households will have to chip in more than $35,000 dollars each! To break it down even further that's nearly $1,200 a year for the next 30 years!

So Ohio voters just decided instead of having public sector workers pay a little more towards their pension - they as taxpayers will most likely pay more!States will have to make up those losses somewhere! And Ohio is in serious trouble when it comes to their state pension fund.

According to the Pew Center on the States - Ohio has a pension bill due of more than $171 million! And only about two-thirds of that is actually funded! So why are pensions such problems across the country?

One of the issues they say is these "defined benefit plans" are required to provide a set number at retirement regardless of market conditions or the general economy.

To do that pensions guess about future returns - and Pew says many assume a yearly return of eight percent. To give you a little perspective on how unrealistic that is, the longest-maturity treasury bond pays barely three percent.

And over the last five years the S&P 500 has returned only about a quarter of a percent! There's also "pension-gaming" - loading up on overtime in the year before retirement. Many do that because pensions often base retiree benefits on the highest year's pay workers get. Many cities and states have adopted rules preventing this from occurring - and many others have raised the retirement age.

But as with most pension fund changes they only impact new or future hires and retirees... So the problem won't be solved for like 40 years!

We as a country just can't afford these pensions anymore - which is why most companies have done away with them - moving from defined benefit pensions to defined contributions like 401(k)s

The question we should all be asking: Is it fair that government workers get what the rest of us don't? We're the ones paying! It's only fair that government workers especially ones who aren't first responders should have to share in the costs of their retirement -- just like everybody else.

Taxpayers Still Footing TARP Bailout Bill

by Gerri Willis

Robert Miller, Chairman of the board of directors at AIG, takes part in the panel discussion "Lessons From the Great Recession: How Businesses Survived and Now Look to Thrive." Taxpayers are getting some payback on their bailout of one of the world's biggest insurance companies: AIG.

It's a drop in the bucket compared to all the money that was sent out the door through the Troubled Asset Relief Program (TARP), but still, American International Group is repaying $972 million to the U.S. treasury this week.

That brings AIG's outstanding balance from the 2008 bailout down to roughly $68 billion. That's out of the $182 billion ploughed into the company at the height of the financial crisis.

The government still owns 77 percent of AIG's common stock - and don't expect it to sell any time soon. Because AIG stock has lost nearly half of its value this year - the expectation is those stock sales will not resume until shares go back up again.

So you're still out $68 billion bucks from AIG. Unfortunately the insurance giant is one of many that still owe Uncle Sam from their bailout deals.

According to the watchdog website Propublica - of the more than $580 billion spent so far, less than $278 billion has been paid back.

The biggest culprits are of course Fannie Mae and Freddie Mac. The mortgage twins have pocketed nearly $170 billion since 2008. The government has only recovered $28 billion.

The automakers also got huge handouts - with the exception of Ford. GM, which ended up in bankruptcy despite it's $80 billion bailout, has paid back about a half of its money.

The government wrote off over a billion dollars in the Chrysler bailout. And while the big banks have paid back on TARP - some smaller financial companies are still in the red.

Ally Financial - an arm of General Motors - has returned about a quarter of its $16 billion dollar handout. And Regions - has barely put a dent in the money it was given!

It's been nearly three years and companies are still not fulfilling their end of the bailout bargain and the taxpayers are the ones paying the price! As usual!

As is the case with the bungled stimulus money, more strings needed to be attached to such gifts - and much more follow-up conducted.

This isn't Monopoly money the White House and Congress can spend at will. They're playing with our hard-earned money. I watch where I invest, and so should they!

Do Fannie, Freddie CEOs Deserve Big Bonuses?

by Gerri Willis

Charles "Ed" Haldeman, CEO of Freddie Mac, speaks at Boston College's Chief Executive's Club of Boston luncheon in Boston on October 26, 2011 Yesterday I told you about Eugene Isenberg - the former CEO, but current chairman of Nabors Industries. He received a $100 million bonus just for switching jobs - despite his company's stock dropping by nearly 20 percent this year. Isenberg was one of many CEOs with similar stories.

It's bad enough shareholders are being forced to pay for failure - but now it turns out it's not just shareholders, but taxpayers!

A new report from Politico shows Fannie Mae and Freddie Mac -- the companies that bear responsibility for the mortgage meltdown -- have approved nearly $13 million in bonuses! That's broken down to about six and a half million for each company.

That despite the fact taxpayers have given these federally backed mortgage giants $169 billion dollars in two years! So who gets what?

The outgoing CEO of Freddie Mac Ed Haldeman- who made nearly a million dollars in base salary last year - is taking home nearly two and a half million dollars in bonuses.

Fannie Mae's CEO Michael Williams is getting the same.

So how can these companies backstopped by us - as taxpayers - defend this?

A Freddie spokesman tells Politico: "Freddie Mac has done a considerable amount on behalf of the American taxpayers to support the housing finance market." If by considerable amount - he means taking a considerable amount of our money, then I guess he's right. Otherwise I'd really like to see the fruits of his labor.

Because here are the numbers: Freddie and Fannie were major players in the president's Home Affordable Modification Program - or HAMP. That - along with a similar program - HARP - was supposed to help three to four million homeowners. Less than two million people were actually helped.

Since the companies stocks are worthless - the bonuses for Freddie and Fannie executives were determined by their success in HAMP and HARP.

Freddie only helped a mere 160,000 people. Fannie Mae: 400, 000. Way less than half the eligible borrowers! So how can you claim success - and how can you defend using our taxpayer dollars to reward mediocrity?

These monstrosities have gotten enough help from us - no more! It's time the administration got a handle on these two money pits!

Proof Fed Incentives Don't Work

by Gerri Willis

I was sad to read today that the rate of homeownership is down again. It's now fallen by the largest amount since the great depression in the last 10 years alone.

According to the Census Bureau, that rate declined by 1.1% points to 65.1%. Ownership rates were down in every single region of the country.

To be sure, the rate decline might not sound like much, but I think it makes a big difference -- think about it -- do you want your next door neighbor to be a renter or an owner?

Research shows that owners care more for their properties and are more likely to get involved in their local community.

In big cities where rental populations are bigger -- like New York City where renters are 69% of the population -- you can see the difference in the care taken of properties and the public areas.

But you can get too much of a good thing.

Over the last decade or so, the federal government pushed more and more people into homeownership. And the experiment backfired.

Too many people bought homes they couldn't afford, because of federal guarantees and easy money. The bubble burst and the feds tried, but couldn't put humpty dumpty back together again.

And now taxpayers are picking up the tab.

First there is the $170 billion we've plowed into Fannie Mae and Freddie Mac, the two housing giants who were supposed to make housing a better place to invest.

Then there are the programs to help people in foreclosure. Those failed too and cost taxpayers more billions.

HARP, HAMP, the even the housing program for the jobless. They were all failures in varying degrees because they never put a floor under housing.

I believe we are going to have to allow this market to recover on its own. And the good news is that there are two powerful incentives at work that can help.

Mortgage rates, as we reported this week have fallen below 4% for this first time ever -- check it out -- this is amazing.

And prices are down 30% on average across the country -- more in some markets. Now that's a powerful incentive!

We don't need any other incentive from the feds. Because history is now showing us that it doesn't work. When it comes to governing less is truly more.

The government should be more like doctors, first do no harm.

Maybe the most convincing argument for ending the federal "support" for housing is this: We have the seventh highest rate of home ownership in the world behind Ireland, Italy, Australia, the UK, Canada and Finland. Which of those have mortgage deductions? None of them. Which of them have Fannie Mae's and Freddie Mac's? None as well.

Home ownership is a good thing. But not everyone has to own. I say the federal government should stand aside and let the market find its own level. Because the money we are spending to fix it just isn't working.


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