For the government's balance sheet, getting paid back 8.6% is a lot more reliable than your gut instinct of infrastructure or education or (especially!) health care.
[1] http://www.washingtonsblog.com/2008/10/the-problem-was-never...
The point of the bailout was to throw all the might of the State behind the sector, in a "ye shall not pass" stance that basically stated that either we cut these banks some slack or our current civilization would burn in flames.
It worked, because people got the message and business eventually went back to normal. We can disagree on whether it was "good enough" (I thought the opportunity for deeper changes was ripe, but I'm just an old-school eurosocialist myself), but I don't think any other entity could have done it except Nation-States.
Wait a minute, just a minute. The way I see it, the US government didn't disarm a nuclear bomb, it just saved Goldman Sachs (and it's creditors AIG) and let Lehman Brothers die. Smart choice by Henry Paulson, I'd expect no less by a former senior GS manager.
It used tax-payer money and I'd be angry if I were an American. I'm angry at the Greek government who did the same thing (among many other things), but then again. I live in Greece, I get a choice (More than 30 parties run in the elections last time I checked...). In the US I get the feeling that you can vote Democrats or Republicans. Largely disputable policies like this, are never going to change.
Greece is another matter; the problem there was not with the bailout, but with stupid terms imposed by the troika to cover debts. In fact, if the troika had behaved with Greece in the same way the US government did with US banks (putting up cash right away, no questions asked), Greece would not have suffered what it did.
I was wrong. It's largely regarded as a bone-headed move today. It was the start of the meltdown.
None but no single institution needed that much. Private investors, especially when working together, could have certainly stumped up funds for individual institutions. In fact, in the case of AIG such an overture by Chinese investors was rejected: http://www.nakedcapitalism.com/2014/10/aig-bailout-trial-bom...
quickly tabs over to lookup Apple's balance sheet
nope. but give it another few years. ;-)
> 8.6% is insultingly low compensation to use taxpayer money
So, money was made?
> could have been spent on more beneficial investments (infrastructure, education, healthcare) to bail out private companies who were the victims of their own greed and poor governance.
Why couldn't it still be used on infrastructure, education, or healthcare?
Thats not what happened when the banks regardless of contracts still gave out large bonuses many times more than the return to the taxpayers.
That simply doesn't add up.
Example: The gov only made 8.5%, but if the US costs have increased 16% over the same period (because of a depression), the overall return is more like 24.5%, ignoring the additional costs of a depression.
http://2.bp.blogspot.com/-nkdzCkw8Rr0/U-qiPe1Tf-I/AAAAAAAARS...
I'd suggest that's a much more direct and obvious economic impact than some maybe-perhaps about driving investment overseas. (How, exactly? Do you think money would suddenly stampede out of the US if regulators developed a spine and jailed the delinquent operators who caused the crash?)
Anywway - clearly the decision was political. It was made for the benefit of the banker caste, and not for the general population.
The underlying problem is unearned privilege.
There's no rational reason for these bonuses. But bankers pay themselves these sums because they know they can, irrespective of the incredible damage they cause to the rest of the economy.
But when reviewing the decision afterwards, I think we need to reject lines of argument that the government did really great on the deal so it's not that bad what happened. We don't want it to happen again, we don't want to be in a no-other-options situation.
Also the country would survive a depression if it really came down to that, the bank wouldn't survive a bankruptcy.
So the playing field are fairly even when it comes to having leverage.
I don't know the details of when the money was disbursed and when the money was recuperated, but if it were disbursed in 2008, and recouped in, say, 2014, there was a 10% rate of inflation, which devalues the currency to the point that no, money was not made.
If 2013, the rate of inflation was 8.2%, which leaves a .4% "profit", assuming no other costs.
If 2012, the rate of inflation was 6.6%, leaving a 2% profit, etc.
Of course, this assumes the money wouldn't have performed in any way just sitting in the government coffers, and I honestly don't know enough to even begin to evaluate whether it would have.
http://research.stlouisfed.org/fred2/data/CPIAUCSL.txt
edit: computation done by comparing Jan 1 2012 to Jan 1 2013, etc.
It is certainly a better deal than the Irish bailout, which will never be paid back and amounted to 100% of GDP.
$614 billion was disbursed
$667 billion was recouped
For a difference of $53.1 billion, i.e. 8.6%. [1]
8.6% is insultingly low compensation to use taxpayer money that, by the way, could have been spent on more beneficial investments (infrastructure, education, healthcare) to bail out private companies who were the victims of their own greed and poor governance. FWIW the average junk bond yield in 2009 was above 20% [2].
[1] http://projects.propublica.org/bailout/ [2] http://money.cnn.com/2011/02/18/markets/bondcenter/junk_bond...