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Bailout Balance Sheet (December 2009): Taxpayers' Revenues Grow, but So Do Losses

The total loss from taxpayers' investment in the bailout has risen to $9 billion, taking into account money for the auto bailout that appears to be gone forever. Earnings have offset that for now, but more losses seem likely in the months ahead.

 Last month, we added a new category to our monthly update on bailout spending: how many billions of taxpayer dollars are lost forever. At the time, we put that tab at $2.33 billion, due to the bankruptcy of the commercial lender CIT, which the U.S. had previously bailed out. But this month, we’ve added taxpayer money now almost surely lost as part of the auto bailout.

We’re offering this total as a way to give you an idea of where the bailout (we track both the TARP and the Fannie Mae and Freddie Mac bailouts) stands now, but it’s worth keeping in mind two things. First, the amount lost will very likely mount over time -- this is just the amount we can be near certain of today. And second, the government is also collecting billions in revenue through the bailout, an amount that, at least for now, exceeds the losses.

Counting TARP money lost through the failure of two banks in November, the total amount lost is about $9 billion. That includes $986 million in taxpayer money that remains on the books of the old GM – the husk of the company left behind through its bankruptcy restructuring – and will never be seen again. And at Chrysler, $5.4 billion of taxpayer debt was left behind in bankruptcy and is "highly unlikely to be recovered," according to the Congressional Oversight Panel.

More losses from the auto bailout are probable. For instance, the former chief of the government’s auto task force said in October that $20 billion of the $50 billion given to GM probably won’t be coming back.

Now for last month’s spending.

The bailout total outstanding rose to $421.5 billion by the end of November. That’s up more than $21 billion from last month, mainly due to another big sum going to Fannie Mae and the continued ramp-up of the toxic asset program. The Treasury also continues to invest in smaller banks, though that spigot has slowed to a trickle: seven banks received about $39 million in November.

Bank of America’s announcement Wednesday that it has been approved to repay its $45 billion bailout means that the amount of the overall bailout outstanding may decrease soon. (BoA must raise $18.8 billion before it can repay the money.) But bailout spending will continue – despite recent talk of winding down some key programs. For example, the amount above doesn’t include any spending through the administration’s $50 billion foreclosure prevention program. That’s because Treasury has yet to report how much has actually been spent on the program. A Treasury spokeswoman said it would in "the near future." Treasury doesn’t pay mortgage servicers for modifications until homeowners pass from the trial to the permanent stage – a topic we covered earlier this week.

We’ll continue to update the totals on our frequently updated bailout database*, which, again, tracks both the TARP and the bailout of Fannie Mae and Freddie Mac.

Now for the revenue side of the ledger.

The TARP has two main sources of revenue: quarterly dividend or interest payments and stock warrant redemptions. The Treasury is obligated to use TARP revenue to pay down the national debt.

So far, bailout recipients have paid $14.7 billion in dividends and interest, an amount that includes the $4.3 billion in dividends paid by Fannie and Freddie and special one-time fees charged to two TARP recipients.

The Treasury has also collected $2.9 billion in exchange for its warrants. The stock warrants, which give the U.S. the right to buy equity in the companies at a set price, came as a condition of the investments. When companies refund the Treasury’s money, the warrants are either sold back to the company or auctioned off. The warrant total should jump soon, when the Treasury auctions off warrants for some big TARP recipients.

Altogether, the Treasury has collected $17.59 billion in revenue from TARP and the Fannie and Freddie bailouts.

So that’s our monthly sobering assessment of the likelihood of recouping the bailout funds: $421.5 billion out the door, at least $9 billion that almost surely won’t be coming back, and $17.59 billion in revenue to serve as a buffer against losses.

*A technical note:  While we do our best to keep our bailout database comprehensive and accurate, the government has not released the data for each participant – namely in the case of the toxic asset program. In those cases, our database shows a lower amount than has actually been spent, because Treasury has not yet disclosed how much was paid to each recipient. However, Treasury has released the aggregate amount invested and lent  via the program so far, and we show that amount. We’ve used it to compute the totals in this post.

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