No, No, No: Erin Burnett, the Government Bank Bailouts Were Not 'Profitable'

Oh boy.

On location at Occupy Wall Street, CNN's Erin Burnett is perpetuating the myth that government bailouts for banks were profitable for taxpayers.

Here, here, here and here are my previous posts about why this is not true.

In short, it's misleading to claim that the bank, or Wall Street, portion of the government bailouts (called TARP) is profitable without referencing the trillions in other bailouts provided by the Fed, the ongoing support for Fannie Mae and Freddie Mac (which could cost taxpayers trillions), and other taxpayer support which directly and indirectly bailed out Wall Street beyond just TARP. The reason is that the recipients of the government bailouts are intricately connected. Wall Street had (still has?) vast real estate holdings, so the support provided to Fannie/Freddie and the Fed's purchase or mortgage backed securities were second and third bailouts, respectively, for Wall Street on top of TARP.

Erin, it is fallacious to promote a myopic view that the government got its money back and then some on the TARP tranche of the government bailouts.  You need to also look at where taxpayers have not yet received their money back (Fannie/Freddie) or are still exposed (Fed's nearly $3 trillion balance sheet). To do otherwise is to engage in an incomplete, inaccurate and deceptive accounting of the bailouts.

For those interested in more detail line-by-line accounting of the various government bailouts can be viewed here.

Video: Meltdown - Documentary (all 4 parts) on the Financial Crisis

h/t Barry R.

David Brooks and Dick "Buy Lehman" Bove Perpetuate TARP Profitability Myth

David Brooks

Some myths just won't die. And if repeated often enough they can become legend.

Banking analyst and regular CNBC talking head Dick Bove is doing his part to keep the TARP was 'profitable' myth afloat. Joining this cause is NY Times columnist David Brooks, who on a recent episode of Charlie Rose made it abundantly clear that accounting is not his forte. Like Bove, Brooks mistakenly believes that TARP is 'profitable'.

To my knowledge Brooks, who based on appearances could easily be mistaken for an accountant, is no financial expert. So perhaps he can be forgiven for sending his proselytizing mouth into terra incognita. Bove, on the other hand, should definitely know better.

As discussed previously here, here, and here, the only way to claim that TARP is profitable is by viewing it in isolation of the entire government bailout, which in addition to TARP includes GSE conservatorship, Fed asset purchases, etc. Bailing out Fannie and Freddie alone could wind up costing taxpayers trillions, thereby swamping any gains seen by TARP.

The results of TARP are intimately connected and influenced by the other government bailout programs. Claiming that the relatively small TARP bailout sliver is profitable is intellectually dishonest and emblematic of the accounting shenanigans which continue to distort the balance sheet picture of our financial system and government.

Is there a political motivation behind the repeated claims of TARP profitability? Establishing this perception would certainly make the the banking sector look better in the eyes of taxpayers. It would also cast a more favorable light on the massive government intervention initiated by 'Government Sachs' and Treasury Secretary Hank Paulson and then furthered by the Obama administration.

Unfortunately this notion of TARP profitability seems to have gained a toehold in the mass media. As such we can expect to see future government bailouts justified on myopic, misleading accounting.

Here We Go Again: More TARP was "Profitable" Hooey

We're coming up on Wall Street bonus season, rumored to be another record setter. So it shouldn't be too big a surprise to see more propaganda being pumped out on the "profitability" of TARP.

On this blog I generally strive not to repeat myself. However, I hope you'll agree that dispelling the reoccurring attempt to foster a myth of TARP "profitability" is worth making an exception. So here goes: it is intellectually dishonest to try and disentangle the "profits" from TARP from the total government bailout.

The real shame about this particular piece of "analysis" is its source, Bloomberg, which had been doing yeoman's work on challenging Fed secrecy and reporting the true cost the entire government bailout. Check this video out for a previous take from the very same Bloomberg on what the entire government bailout has cost taxpayers. (Note to Bloomberg's Editorial Department: you guys need to get your staff on the same page!)

Oh when of when will we cease indulging the fiction that Too Big Too Fail banks are private enterprises?

'Why Do We Keep Indulging the Fiction that Banks are Private Enterprises?'

A good read over at Naked Capitalism that goes beyond the usual point made about “privatized gains and socialized losses”.

True Cost of Government Bailouts

Watch the full episode. See more Need To Know.

Today's Hooey: Claiming Bank Bailouts Are "Profitable" for Taxpayers

CNBC, Reuters, and other media outlets trumpeted Keefe, Bruyette & Woods claim that bank bailouts are profitable for the U.S. government (and hence the U.S. taxpayer).

If it weren't for the report's intellectual dishonesty this news would have made for a nice political headline and taxpayer feel good story.

The glaring problem with Keefe's Mr. Fred Cannon's "profitable" conclusion is that he arrived at it only by ignoring all the other government bailouts during the financial crisis.