New York Times columnist Aaron Ross Sorkin wonders if the government’s claim that its bailouts of Wall Street firms worked and will be profitable might be true. What do you think?
What if, after all that panting over Washington’s bailout of the financial system, we learned that it actually worked?
And what if, after all that vitriol over the government’s risking hundreds of billions of dollars to rescue Wall Street from disaster, it turned out that taxpayers might actually lose nothing, or even make a profit?
Could it be? Really?
Every couple of months the Treasury Department takes a moment to strategically leak some good news about the bailouts. It happened again on Monday, when a Treasury official told The Wall Street Journal that America’s coffers would be only $89 billion lighter after all accounts were settled from the rescues, down from an earlier estimate of $250 billion.
It’s enough to make us all feel rich, isn’t it?
Inside the Obama administration, there are whispers of even greater optimism, with some officials suggesting that if the economic recovery continues apace, the bailout program could eventually turn from red to black.
That may seem far-fetched to anyone who remembers the dire predictions about banks like Citigroup, but the numbers tell a different story. The government’s $45 billion investment in Citigroup alone is on track to make a profit of nearly $11 billion, plus $8 billion or so in interest and other fees.
People inside the administration no longer refer to Citigroup as the “Death Star”; now it is a “profit center.”
Of course, we’re still expected to lose $48 billion on the government’s rescue of the American International Group. But two people close to the board suggested to me that as the company recalculates the value of assets in its portfolio that were once considered “toxic,” the government could actually claw its way back to even on that investment, if it holds on to its stake long enough.
A year ago, by the way, these same people told me they expected the government to take a “$100 billion bath” on its investment in A.I.G.
And then there are the banks that have settled up with Uncle Sam, like Goldman Sachs, Morgan Stanley and Bank of America. We’ve gotten all our money back from them, along with several billion dollars in interest…
[continues in the New York Times]