When Will We Get All Our Money Back?

Enter your email address:

Enter the recipients' email addresses, separated by commas:

Message:

Richard Drew / AP Photo The markets cheered as AIG touted a $35 billion dent on its taxpayer IOU. But was anyone watching when they recently borrowed billions more? Nomi Prins on a classic Wall Street shell game.

AIG's $35 billion sale of its Asian division yesterday was announced with great fanfare from Wall Street to Washington. It "enables AIG to realize value on a faster track to repay U.S. taxpayers," said AIG CEO Bob Benmosche. "A major step in the AIG restructuring plan to de-leverage, de-risk and pay back taxpayers," said a U.S. Treasury spokesman.

With such high hopes, a few million taxpayers must all be asking the same question: when are we getting our money back?

Yesterday's AIG sale won't even go to TARP, which has become synonymous with repaying taxpayers.

A fair question, with an ostensibly positive answer. Of the $700 billion originally allocated by Congress under the TARP program, "only" $493 billion was ever deployed. Of this $182 billion has been repaid, leaving $311 billion outstanding, with AIG ($70 billion, according to the latest Treasury reports) and the auto industry (with $78.2 billion) leading the pack. At this payback rate, the tab should be closed by 2012 in time for Obama to take a victory lap and keep Treasury Secretary Tim Geithner out of the firing line, right?

Wrong. Yesterday's AIG sale won't even go to TARP, which has become synonymous with repaying taxpayers. Study the money trail, and it's clear that repayments come through a revolving bailout door that allows firms to pay back one federal perk (TARP) with another one (say, a cheap Fed loan used as capital to drive record trading profits). Or in Detroit's case, a cash for clunkers program (though that really didn't work very well). With AIG, the game has included borrowing an extra $3.1 billion from one NY Fed credit pool to repay $3.5 billion of another. It's the equivalent of taking out a new credit card to repay your old balance. The debt's still there, just rearranged, waiting.

Despite the giddiness of the self-involved, we taxpayers should be careful about counting the bailout payback chickens before they're hatched. First, the AIG deal, even if it goes through, doesn't net TARP anything at all, according to AIG' s press release. TARP is 100 percent taxpayer money, funds approved by Congress and provided by the Treasury Department. It's supposed to be Pavlovian: we hear "taxpayer payback" and are supposed to think TARP and be mentally appeased. But AIG is re-paying the Fed, whose leader has repeatedly stated that what the Fed provided isn't coming from the taxpayer's pocket (though it indirectly does).

Second, the deal doesn't happen immediately, leaving ample time to sour, and AIG to post a few more quarters of losses.

Third, AIG and other financial companies are on the hook to us all for a lot more than TARP.

The flimsiness of the deal itself reflects how much payback risk remains more generally. The buyer, a company named Prudential (not affiliated with the U.S. company of the same name) will pay $35.5 billion for AIG's Asian life insurance business, $25 billion of which will be in cash -which Prudential doesn't have yet. Prudential expects to raise this money in the capital markets by the third quarter of the year, but that's placing a lot of faith in the unknown. The last time Prudential considered buying the AIG unit, a year ago, its former CEO, Mark Tucker only wanted to offer $20 billion for the whole business due to suspicions about its asset quality.

Even it the deal goes through, that $70 billion in AIG TARP money remains due. All told, yesterday's sale would repay just 13% of all the $182 billion in total perks that AIG relies on, and 19% of the $130 billion that it's actually used to survive.

View as Single Page 12 Back to Top March 2, 2010 | 2:12am Facebook | Twitter | Digg | Share | Emails | print var OutbrainPermaLink=document.location.href.replace(document.location.search, '').replace(/\/\d+\/$/,'/').replace(document.location.host, 'thedailybeast.com'); var OB_Template = "The Daily Beast"; var OB_demoMode = false; var OBITm = "1255455386150"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } Tarp, Bailouts, Aig, Wall Street, Aig Payback, Benmosche, Tarp Payback, When Will Get Our Money Back, Nomi Prins, Aig Bailout  (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: Plantagenet

AIG is owned by the government now, as is GM. If taxpayers want to be repaid, they need to put pressure on the Obama administration for the money, because the two biggest bailout money deadbeats are now owned and controlled by the Obama administration.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 2:56 am, Mar 2, 2010 al-nafs

When the gov't takes a majority share, then yes they'll be owned by the gov't. That hasn't happened yet, the feds have just given them extremely large loans, they haven't bought a majority of the voting stock. The loans still don't represent a majority of the value of those companies. The gov't is simply a very big creditor.

Flag It | Permalink | Reply 12:46 pm, Mar 2, 2010 Centrist420

I'd rather own the company than to just give them money for a promise. I am in the business of lending and buying assets. I don't give a nickel to anyone without collateral. Does ANY bank? This TARP was, simply, a robbery of citizen funds, to be collected over time, keeping us taxed to death, for the benefit of the banks. To be clear; the government FORCES us to pay taxes, yet wastes our money by giving it to unrepentant thieves. I wonder why that might be...Oh, wait, I think I might know...Do you think it might have something to do with Lobby Money? All of these jokers are owned by lobbyists. We need to VOTE OUT ALL INCUMBENTS over the next election cycles.

Flag It | Permalink | Reply 2:31 pm, Mar 2, 2010 DakLak

A mere drop in the bucket - where's the rest?

Flag It | Permalink | Reply 3:07 am, Mar 2, 2010 jbrendan

These continued accounting tricks are absolutely vulgar. The only thing the government seemed to learn from Enron is how they could get in on the action. Paying back TARP through a guaranteed Fed loan? Can I just start using my Monopoly money already?

Flag It | Permalink | Reply 4:53 am, Mar 2, 2010 GPatton

AIG was bailed out to pull Goldman Sachs chestnuts out of the fire, so to speak. Goldman and the other banks that were made whole on their AIG involvements by the AIG bail out should pay back the money used for that purpose. And they should pay back in full, with interest before paying one cent in bonuses to the banksters. George Patton

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 6:21 am, Mar 2, 2010 hockeydog

Zactly right George! The shell game continues, Goldman Sachs simply repaid their TARP money with TARP money funnelled into their coffers through the backdoor Credit Default Swaps. Thataway the old boys could feel good about giving themselves those multi-million dollar bonuses. I wonder how many millions Obama's boy, Hank Paulson ended up with? Oh, wait! He was George W's boy.

Flag It | Permalink | Reply 8:47 am, Mar 2, 2010 truthiness2

When will we get our money back? Surely you jest!. We got mugged. No returns from muggers.

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 8:20 am, Mar 2, 2010 booga20

We got mugged alright but by both parties.............

Flag It | Permalink | Reply | (–) Show Replies Collapse Replies 10:24 am, Mar 2, 2010 Centrist420

Yes, BOTH parties screwed us, and I wish that the people of this nation would wake up and realize that, rather than the one-sided arguing we always have. There is nothing to argue about, my friends. We are all in the same boat, more or less. Don't let the RNC and the DNC corrupt your thoughts by feeding you THEIR agendas. FORCE them to pass laws that help OUR agenda, like changing the tax code to benefit you and I, instead of the lobbyists who pay our representatives to screw us.

Flag It | Permalink 2:35 pm, Mar 2, 2010 sonofloud

To paraphrase George Carlin, if you were serious about stopping Wall St. corruption start nailing these guys to some wooden crosses on Washington mall and we'd see some changes really fast.

Flag It | Permalink | Reply 10:31 am, Mar 2, 2010 Johnnyappleseed

When will we get our money back? After tax and bonuses are paid. As long as congress in in session we should be leary.

Flag It | Permalink | Reply 1:19 pm, Mar 2, 2010 RandyMiller

If some foreign nationals had done this to us, we would have invaded another country. As it is, Cassano, Blankfein, Paulson, etc, are not only walking around free, they have gotten rich off of our money.

Flag It | Permalink | Reply 1:25 pm, Mar 2, 2010 TK798999

The American people are going to have to collect this debt at the ballot box in November 2010 and November 2012. Start calling, e-mailing and writing your members of Congress and the members from ALL states, NOW. Call everyday and let them know how you feel. Call the White House too. They will continue this abuse of their power as long as we allow it.

Flag It | Permalink | Reply 1:32 pm, Mar 2, 2010 $('#c_total span').html('14'); $('#c_total').show(); Share this comment on Facebook

Thank you. As a first time user, your comment has been submitted for review. It can take anywhere from a few hours to a day or two for your comment to be reviewed, depending on the time of week and the volume of comments we receive.

Please log in to leave comments.

The Photo That Could Doom the Democrats

by Peter BeinartInfo

Peter Beinart, senior political writer for The Daily Beast, is associate professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation. His new book, The Icarus Syndrome: A History of American Hubris, will be published by HarperCollins in June. Follow him on Twitter and Facebook.

X Close

How Rush Gets It Wrong

by John AvlonInfo

John Avlon's new book Wingnuts: How the Lunatic Fringe is Hijacking America is available now by Beast Books both on the Web and in paperback. He is also the author of Independent Nation: How Centrists Can Change American Politics. Previously, he served as chief speechwriter for New York City Mayor Rudy Giuliani and was a columnist and associate editor for The New York Sun.

X Close Sexy Beast

The Cost of Bunning's Filibuster

State-by-state breakdown of lost jobless benefits.

Obama 'Open' to Four GOP Ideas

Pens letter after summit.

State Dems Urge Paterson to Resign

Party chairman heads to Albany for meeting.

Obama's Half-Baked Bank Reform

by Nomi PrinsInfo

Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.

X Close

Bernanke in Denial

by Nomi PrinsInfo

Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.

X Close

Bring Back That Wall!

by Nomi PrinsInfo

Nomi Prins is author of It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street (Wiley, September, 2009). Before becoming a journalist, she worked on Wall Street as a managing director at Goldman Sachs, and running the international analytics group at Bear Stearns in London.

X Close Real Housewives, Real Hatred! Youngest Celebrity Grandparents Emily Dickinson's Racy Side Do I Have to Read Jackie Collins? Roger Ebert Debuts Familiar Voice on 'Oprah' Shock! Howard Stern Skewers 'Lap Dog' Jay Leno McCain Calls Kerry-Graham-Lieberman Climate Change Plan 'A Joke' Michelle Obama Takes Obesity Drive To Fattest State -- Mississippi Obama May Ask for Brake Override in All Cars The Truth About "Teabagging": Is the Term Offensive? Health Care Is Going to Overtime The Tupperware Effect: Can Direct Sales Help Women Living in Poverty Throughout the World? 13-Year-Old Ordered Stun Gun in Jackson House Children Services at Jackson Home Ric Flair 911 Call -- 'They're Both Drunk'

Sign me up for The Daily Beast's morning email and breaking news alerts.

Sign me up for The Yes List, weekly cultural recommendations from The Daily Beast.

I'd like to recieve e-mail notifications as:

Text Only HTML

Sign me up for occasional special offers sent by The Daily Beast on behalf of select sponsors, and for occasional special offers from IAC companies.

Please register to manage your email preferences and comment on the site. Read Full Article »