The Bailouts Of 2007-2009

Jun. 14, 2015 8:54 AM ET3 Comments
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Editor's note: This article was originally published on June 13, 2015 by James Hamilton here.

The latest issue of the Journal of Economic Perspectives had a very interesting symposium on the costs and benefits of the various bailouts implemented during the Great Recession.

The first article in the issue is by University of Chicago Professor Austan Goolsbee and Princeton Professor Alan Krueger. Goolsbee served on the President's Council of Economic Advisers from March 2009 to August 2011, and Krueger spent much of 2009 to 2013 in the Treasury Department and CEA, so one might not expect them to be big critics of the policies. Their review is quite candid in communicating the misgivings that many of those in government had about the measures. Here's Goolsbee and Krueger's summary of the bottom line:

The US Treasury recovered a total of $39.7 billion from its investment of $51.0 billion in GM. By the end of 2014, Treasury sold its remaining stake in Ally Financial (ALLY), recovering $19.6 billion from the original $17.2 billion investment in Ally, for a $2.4 billion gain for taxpayers. In May 2011, Chrysler (FCAU) repaid its outstanding loans from the Troubled Asset Relief Program (TARP) six years ahead of schedule. Chrysler returned $11.2 billion of the $12.5 billion it received through principal repayments, interest, and cancelled commitments, and the Treasury fully exited its connection with Chrysler.

And what did any of the rest of us gain from this?

Since bottoming at 623,300 jobs at the trough of the recession in June 2009, employment in the motor vehicles and parts manufacturing industry has increased by 256,000 jobs (as of July 2014). This is a stark contrast from the previous recovery, when jobs in the industry steadily declined. The increase in the number of jobs in motor vehicles and parts manufacturing accounted for nearly 60

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James D. Hamilton has been a professor in the Economics Department at the University of California at San Diego since 1992. He served as department chair from 1999-2002, and has also taught at Harvard University and the University of Virginia. He received a Ph.D. in economics from the University of California at Berkeley in 1983. Professor Hamilton has published articles on a wide range of topics including econometrics, business cycles, monetary policy, and energy markets. His graduate textbook on time series analysis has over 14,000 scholarly citations and has been translated into Chinese, Japanese, and Italian. Academic honors include election as a Fellow of the Econometric Society and Research Associate with the National Bureau of Economic Research. He has been a visiting scholar at the Federal Reserve Board in Washington, DC, as well as the Federal Reserve Banks of Atlanta, Boston, New York, Richmond, and San Francisco. He has also been a consultant for the National Academy of Sciences, Commodity Futures Trading Commission and the European Central Bank and has testified before the United States Congress. _________________________________________________ Menzie D. Chinn is Professor of Public Affairs and Economics at the University of Wisconsin’s Robert M. La Follette School of Public Affairs. His research is focused on international finance and macroeconomics. He is currently a co-editor of the Journal of International Money and Finance, and an associate editor of the Journal of Money, Credit and Banking, and was formerly an associate editor at the Journal of International Economics and the Review of International Economics. In 2000-2001, Professor Chinn served as Senior Staff Economist for International Finance on the President’s Council of Economic Advisers. He is currently a Research Fellow in the International Finance and Macroeconomics Program of the National Bureau of Economic Research, and has been a visiting scholar at the International Monetary Fund, the Congressional Budget Office, the Federal Reserve Board and the European Central Bank. He currently serves on the CBO Panel of Economic Advisers. With Jeffry Frieden, he is coauthor of Lost Decades: The Making of America’s Debt Crisis and the Long Recovery (2011, W.W. Norton). He is also a contributor to Econbrowser, a weblog on macroeconomic issues. Prior to his appointment at the University of Wisconsin–Madison in 2003, Professor Chinn taught at the University of California, Santa Cruz. He received his doctorate in Economics from the University of California, Berkeley, and his AB from Harvard University.

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