Bailout Revisited

Includes: BAC, C, KBE, KRE
by: Modeled Behavior

By Karl Smith

More good news on TARP via CNBC

U.S. taxpayers earned an annualized 8.5 percent return from the government’s bailout of 49 financial firms, underscoring efforts by the industry to speed up repayments and warrant repurchases, according to a report by SNL Financial.

I know the Regional Banks are not looking as good but the long term return prospects are still solid. After all BofA (NYSE:BAC) and Citi (NYSE:C) didn’t look so hot last year but the government’s return on holding them was solid.

A point I want to make a big deal out of as this thing gets settled is whether or not this was "taxpayer money." If the taxpayers never had their taxes increased to pay for the bailout and if indeed as I argue there was no serious threat of ever having their taxes increased, then in what sense was it "taxpayer money."

The deal was leveraged using taxpayer goodwill but that’s not quite the same thing.