Are You Happy or Angry that the Government has Made 8.2% on TARP?

This story from Bloomberg reporters Yalman Onaran and Alexis Leondis is making the rounds in the blogosphere today. According to an analysis conducted by Bloomberg…

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than they could have made buying 30-year Treasury bonds — enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit.

But as the story also notes, “Democrats are struggling to turn those gains into political capital…”

How is it possible that an investment that makes the federal government look like it has the smarts of Warren Buffet is such a hard sell with voters?

Part of the reason may be that voters think the 8.2 percent is coming out of their rather than the financial institutions’ pockets. At least that’s what I heard at several focus groups I observed earlier in the year. The participants in the focus groups bristled when they were asked about the profits the government was making on TARP. Rather than be happy about it, they insisted that the banks were repaying the TARP funds and interest with higher fees that customers were being charged rather than by reducing other costs or lowering dividends.

It was almost a perfect example of a total no-win situation. They would have been angry if the government lost money and they were definitely angry that it was getting paid back. They would also have been angry if the government had made no attempt to deal with the situation, that is, if there had been no TARP, and they were clearly irate at everyone who had anything to do with it being enacted.

Because of this, not only is turning the latest TARP results into political capital always going to be difficult, but just keeping it from being a complete negative may be impossible.

About Stan Collender 126 Articles

Affiliation: Qorvis Communications

Stan Collender is a former New Yorker who, after getting a degree from the University of California, Berkeley, moved to Washington to get it out of his system. That was more than 30 years ago.

During most of his career, Collender has worked on the federal budget and congressional budget process, including stints on the staff of the House and Senate Budget Committees; founding the Federal Budget Report, a newsletter that was published for almost two decades; and for the past 11 years writing a weekly column for and now

He is currently a managing director for Qorvis Communications, where he spends most of his time working with and for financial services clients.

Visit: Capital Gains and Games

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