TARP: Bailout or Money Pit?

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Includes: AIG, AXP, BAC, BBT, BK, C, CIT, CMA, COF, FITB, GKM, GM, GS, JPM, KEY, MS, PNC, RF, STI, STT, USB, WFC
by: Chris Wang

Since the TARP bill was passed in October, over $332 billion have been “committed for investment” to 473 financial institutions (according to Propublica.com).

Here are some more interesting facts:

  1. 23 financial institutions received at least $2 billion in TARP funds.
  2. These 23 institutions received 93% of the total funds distributed.
  3. The average stock decline of these companies is -52% since the beginning of 2009, over twice the decline of the S&P 500.

If you believe in the efficient market hypothesis, then the market doesn’t seem to believe that these funds are going to be enough to save these critically wounded giants. Are they too big to fail or are they too big to possibly save? The only two stocks that have outperformed from this group are Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS). Did they even need the bailout? You decide.

Bailout Amount

Price YTD

Name

(in millions)

as of 3/5/09

AIG

$75,000

-77.7%

Bank of America (NYSE:BAC) (incl. Merrill Lynch)

$45,000

-77.5%

Citigroup (NYSE:C)

$45,000

-84.8%

Wells Fargo (NYSE:WFC)

$25,000

-72.5%

JPMorgan Chase (NYSE:JPM)

$25,000

-47.4%

General Motors (NYSE:GM)

$14,284

-41.9%

Goldman Sachs (GS)

$10,000

-3.2%

Morgan Stanley (MS)

$10,000

12.1%

PNC Financial Services (NYSE:PNC)

$7,579

-59.2%

U.S. Bancorp (NYSE:USB)

$6,599

-64.0%

Chrysler

$5,500

NA

GMAC (NYSE:GKM)

$5,000

-48.1%

SunTrust (NYSE:STI)

$4,900

-66.8%

Capital One Financial Corp. (NYSE:COF)

$3,555

-71.8%

Regions Financial Corp. (NYSE:RF)

$3,500

-61.1%

Fifth Third Bancorp (NASDAQ:FITB)

$3,408

-83.4%

American Express (NYSE:AXP)

$3,389

-44.3%

BB&T (NYSE:BBT)

$3,134

-51.5%

Bank of New York Mellon (NYSE:BK)

$3,000

-30.6%

KeyCorp (NYSE:KEY)

$2,500

-34.3%

CIT Group (NYSE:CIT)

$2,330

-56.4%

Comerica Incorporated (NYSE:CMA)

$2,250

-37.7%

State Street (NYSE:STT)

$2,000

-50.9%

average decline

-52.4%

S&P 500

-24.4%

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