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Bailout Explained and simplyfied. (all of the information was compiled from many different information websites, as well as illustrations. I claim no ownership or rights to the art or information in this slide. I compiled the info and symplified it for a college presentation.
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THE BAILOUT
Uncle Sam To The Rescue
INCORRECT!
Tax Payers to the Rescue
Bailout
The bailout is really two separate bills:
The Housing and Economic Recovery Act
Emergency Economic
Stabilization Act
Bailout
These Acts created Umbrella
programs and other programs were
enabled under these Umbrella
programs.
Umbrella Programs
The Housing and Economic Recovery Act
Emergency Economic Stabilization Act
created the Trouble Asset Program TARP
The Housing and Economic Recovery Act
Broad bill that launched a foreclosure
relief program. This program enacted
The Preferred Stock Investments
Program
Fannie Mae and Freddie Mac
Bailout
What Did It Do?
Essentially, Fannie Mae and Freddie Mac were nationalized: placed under the Conservatorship of the Federal Housing Finance Agency.
Under the terms of the rescue, the Treasury has invested billions to cover the companies' losses.
Trouble Asset Relief Program
TARP consists of several programs that attempt to stabilize the economy by different means. Each program is directed to address a specific problem.
Currently, there are 13 programs, some of which are already being rolled back and some of which are relatively new in TARP.
The Housing Economic Recovery Act
and TARP at Work
TARP’S PROGRAMS
Capital Purchase Program
Automotive Industry Financing Program
Systematically Failing Institutions
Program
Making Home Affordable
Targeted Invested Program
Public Private Investment Program
TARP’S PROGRAMS
Small Business Lending Program
Term Asset Backed Securities Loan Facility
Auto Supplier Program
Housing finance Agency Innovation Fund
Community Development Capital
Capital Assistance Program (CAP)
Most Talked About, Controversial and Expensive Programs
Capital Purchase Program
Automotive Industry Financing Program
Targeted Investment Program
Systematically Significant Failing
Institutions
Capital Purchase Program
The CPP is a voluntary program whereby
Treasury has made a long-term investment
in financial institutions of all sizes in order
to stabilize the financial sector, enabling the
flow of credit to businesses and consumers.
These measures have prevented a system-
wide collapse.
CPP Decoded
Through the CPP, Treasury is providing
capital to viable banks through the
purchase of banks’ preferred shares.
In return for its investment, the
Treasury will receive dividend
payments and warrants.
Automotive Industry Financing Program
Provided loans or equity
investments to General Motors,
GMAC, Chrysler, and Chrysler
Financial in order to avoid a
disorderly bankruptcy of one or more
auto companies.
Automotive Industry Financing Program
Reasoning behind AIFP
To Big To Fail
Such an event would pose a systemic risk to the country’s financial system.
What Did It Do?
Treasury’s loans to the automobile
industry forged a path for these
companies to go through orderly
restructurings and achieve viability.
Targeted Invested Program
TIP provided financial assistance for
struggling companies whose failure
could damage the financial system.
Financial Assistance in the form of
Investments
Systematically Significant Failing Institutions
Was a programs specifically created
and used to save AIG.
Check Please…
How Much did saving America’s collapsing
economy cost?
BAILOUT COST
The US Treasury set up two funds amounting to
1.1 Trillion Dollars
$400 Billion fund for the Economic Recovery Act
$700 Billion fund for the Trouble Asset Relief
Program.
$542.08 billion has actually been spent,
invested, or loaned.
Who Got What? Banks and Other Financial Institutions
$244.9 Billion 45.17% Fannie and Freddie
125.9 BILLION 23.22% Auto Industry
81.35 BILLION 15% AIG
69.87 BILLION 12.88% Toxic Asset Purchase
19.16 Billion 3.53% Foreclosure Relief
90 million 0.016%
Banks and Other Fi-nancial Institu-tions
Fannie and Freddie
Auto Companies
AIG
Toxic Asset Purchase
Forclosure Relief
Everyone Gets a Slice
SHOW ME THE MONEY!!
Some of the Recipients of the Bailout Money
Where Did The Money Go?
In total there are about 834
companies who did or will benefit
from Bailout Money
American International Group Inc.
$69.87 Billion
The U.S. government owns about 80% of AIG as a result of its injection of capital to save the company from
collapse in 2008 (Wall Street Journal)
Citigroup
45 Billion
JPMORGAN CHASE $25 Billion
American Express Financial Services
3.4 Billion
BAILOUT MONEY IN YOUR
NEIGHBORHOOD
Jersey Bailout
Lakeland Bank
$59 Million
Valley National Bank
300.0 Million
Strings Attached?
American Recovery and Reinvestment Act of 2009 created or enhanced restrictions on recipients of TARP money such as
Limitations on the financial risk they are allowed to take
Limitations on how much money they paid in bonuses to top executives
The bailout money has to eventually be repaid.
Paid Back
Wells Fargo$25 billion owns $0.00
Chrysler Financial ServicesPaid $ 1.5 billion owns $0.00
No one really knows exacly, if the
goverment is goingTo make money or lose money these
InvesmentsOnly time will tell.
