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.

Mortgage Fright!

by Gerri Willis

Check out the story today in The New York Times on Fannie Mae and Freddie Mac. You can't miss it - it's on the front page. And, it's guaranteed to scare the living daylights out of anyone thinking about buying a home. The story says you can kiss your 30-year mortgage goodbye. The reason? The death of Fannie Mae and Freddie Mac, the mortgage giants at the center of the financial crisis. Both the administration and Republicans agree it's time for these two - propped up by $150 billion of our taxpayer dollars - to go. But the Times story maintains that mortgages will become more expensive - rates higher, fees out of sight. Look, just because lenders have been on the sidelines in the months following the financial crisis doesn't mean they always will be. When the cloud that is regulatory uncertainty passes and prices stop falling, I believe they will get back in and in a big way. The reality is this: We don't need Fan and Fred to oversee the housing market to boost home ownership. We have some of the lowest rates of home ownerships as it is among developed countries. Fan and Fred have bought us nothing but trouble.

ADVERTISEMENT

On Twitter

ADVERTISEMENT