When we use the term deadbeats we usually think of some college buddy, in-law, never-do-well relative or just some bum who borrows and never repays a loan. We usually do not think of deadbeats as the ones who make a gallant attempt at repaying a good portion of the debt either. Rarely do bankers come to mind; but since 2008, bankers seem to be giving a new meaning to deadbeat! And just like our imagination, most bankers are not deadbeats but those that are sully the name of the entire group!
The big banks (Citigroup, Bank of America, Wells Fargo, JPMorgan Chase, Goldman Sachs and the other too big to fail banks) have all paid out more money to the Treasury than they borrowed. So, in that regard, the taxpayers were well served. However, they were not the only borrowers and those that have yet to payback fall into 2 categories: deadbeats and gamers!
Of the $604 billion disbursed to all bailout recipients, not all of the money has been repaid yet. $430 billion has been repaid. Matter-of-fact a whopping $174 billion has yet to be repaid, which represents almost 29% of all money disbursed. The worst deadbeats are Fannie Mae and Freddie Mac. The two companies owe $90 billion and $51 billion respectively. After four years they have paid back less than ¼ of what they borrowed! After these two banks, the next largest deadbeat is General Motors (GM) which despite positive earnings owes the federal government $27 billion and has paid back about $23 billion or less than half of what it borrowed. For 2010, 11 and 12 GM has earned $4.7 billion, $7.6 billion and it appears it will probably earn $9.2 billion for 2012. Yet it has paid the government less than half it owed. Our other big deadbeats are GMAC (now called Ally Financial) it borrowed more than $16 billion and owes almost $11 billion. CIT Group borrowed just over $2.3 billion and owes just under $2.3 billion currently. We probably won’t see much of those funds back.
For comparison, Chrysler has paid back almost 90% of the roughly $11 billion it borrowed. AIG, the big insurance company, borrowed $67 billion and has paid back more than 95% of what it borrowed, currently owing slightly more than $2.6 billion.
Then there are the companies that are gaming our Treasury: Wellington Management Legacy Securities, Black Rock PPIF, AG GECC PPIF Master Fund, Oaktree PPIP Fund and Marathon Legacy Securities Public-Private Investment Partnership. These funds were created to borrow money at almost no cost and then lend the funds to asset backed securities. The Federal Reserve created a program to woo such companies to make funds available to decrease the cost of borrowing. Needless to say, these funds are making money and hopefully they are providing a useful service since we, the taxpayers, are paying for all of this.
Source: Page 20 of the October 15, 2012 Bloomberg Businessweek magazine
