Correction: 5/24 12:57
FORTUNE -- A few weeks ago the Treasury Department put out its latest report of what the government's rescue efforts in the wake of the financial crisis cost taxpayers. The conclusion: Nada. In fact, the Treasury says that if you take a broad view of all the bailout programs, taxpayers actually are looking at a $9 billion profit. It is the government's latest effort to paint the bailouts as a win-win for everyone. And like others it's clearly wrong.
Gretchen Morgenson does a pretty good job of taking on the report in this weekend's New York Times. In order to get to its $9 billion profit, the government includes in its calculations the $179 billion gain that the Federal Reserve made during the financial crisis. But at least a portion of the Fed's profits are interest payments on U.S. government debt, which the Fed has been buying to drive down interest rates. Those payments, of course, are paid by the government. So calling that a net gain is silly.
But Morgenson misses the bigger point. Ever since the bailouts, the government has been trying to cut the data in ways to make the bailouts seem profitable. In the past they have tried to focus on the bank bailouts alone, saying they made $10 billion. But that ignores the bailouts of the auto companies, which cost $22 billion. Other times the government has said that taxpayers have received all of their money back from the bailout of the nation's largest banks. But that ignores the 351 small and community banks that owe $15 billion to the government, and according to TARP inspector general Christy Romero have no real ability to ever pay that back.
In the latest report, the government excludes its foreclosure prevention programs. That seems odd for a report that the government says is its broadest look ever at its response to the financial crisis. Foreclosures, afterall, were at the heart of the problem. But that may make sense for the government's accounting: Add in the mortgage modification efforts, and the government's bailout efforts swing to a $51 billion loss.
The problem with this type of accounting of the bailouts is that politically it's not realistic. When the government starts handing out assistance, it's nearly impossible politically to stop with the biggest banks. Indeed, Occupy Wall Street and others are still pushing to get the government to do more for struggling homeowners and others. It's likely Uncle Sam eventually will.
In the end, it seems odd that the Obama administration would want to stick with this idea that the bailouts were profitable. It seems to undercut their argument that there is a need for financial reform, and to rein in Wall Street and prevent future bailouts. That's something that everyone seems to agree on. Everyone hates bailouts. I say we leave it that way.
Correction: I was wrong to say that the Treasury's cost analysis of the government's financial rescue efforts didn't include home loan modification programs. It does. Even with the program the government can claim that it made money on the bailouts, as long as you include the Fed's transfers, which I am not sure you should. I should have also mentioned that Fortune has covered this ground before. Our earlier analysis backs up the claim that the government made money on the bailout efforts. What's more, I am sorry for the delayed correction, but I waited to talk to the Sigtarp's office to get their analysis of the bailout efforts, because in part that's supposed to be their job. The Sigtarp's main beef appears to be that Treasury is counting shares the Federal Reserve got from AIG to offset losses that the Treasury had on its AIG investment. That tripped me up as well. But it really wasn't part of what I wrote here, which was wrong. In the recent words of Jamie Dimon and Robert Greifeld, this was not my finest hour.
An outside critique of our analysis: "Surprise! The big bad bailout is paying off"
By Bob Eisenbeis, Cumberland Advisors
A recent column by Allan Sloan and Doris Burke in the Washington Post claims that the distasteful financial bailout not only worked but also generated a profit for the government of at least $40 billion and perhaps as much as $100 billion. Their conclusion is based on their working of the numbers, and the MOREJul 19, 2011 5:00 AM ET
Our recent analysis of the U.S. bailout caused quite a ruckus. Here is our response to the critics who say we omitted some key details.
FORTUNE -- When we wrote our story about the financial-system bailout turning a profit for taxpayers, my Fortune colleague Doris Burke and I (and our editors) decided that less was more. So we showed you our bailout numbers, but didn't give you much detail about how MOREAllan Sloan, senior editor-at-large - Jul 19, 2011 5:00 AM ET
The U.S. government's often maligned $14 trillion intervention not only staved off global collapse - but is making money.
With Doris Burke
FORTUNE -- The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn't really need it, it MOREAllan Sloan, senior editor-at-large - Jul 8, 2011 5:00 AM ET
When the government offered GMAC's old shareholders a free ride, how could they turn it down?
You would think, at this point, that there would be nothing left to be outraged about when it comes to government bailouts. But the more bailout rocks you turn over, the more well-connected players you find who aren't being forced to pay the full price of their mistakes. One of the little-noticed rocks I've MOREAllan Sloan, senior editor-at-large - Jan 19, 2011 5:00 AM ET
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