THANKS, W:

The Bailout Bonanza: TARP's early returns are impressive. (Daniel Gross, Aug 28, 2009 , Newsweek)

The final cost of TARP will be a fraction of the original $700 billion, and taxpayers are turning a profit from its central component: the Capital Purchase Program.

Paulson's initial efforts, continued by the Wall Street sharpies who succeeded him, had the characteristics of an investment fund. Under the CPP, the government would lend money to banks at 5 percent, through the purchase of preferred shares. As investors in troubled companies do, the government demanded an extra ounce of flesh: warrants, which are the right to buy a stock at a set price. It's like lending money to a financially troubled friend to buy a house, but getting ownership of the kitchen.

The spreadsheets at financialstability.gov document the status of the 667 investments, worth $204.4 billion, made under the CPP. Morgan Stanley, which borrowed $10 billion in October 2008, paid back the cash in June and purchased the warrants for $950 million on Aug. 12, giving taxpayers a 12.7 percent return, according to SNL Financial. For the 22 companies that have bought back shares and warrants, the taxpayer received an annualized return of 17.5 percent—better than most hedge funds have done lately. (Another 15 have repaid part or all of the principal.) Since many of the largest financial institutions have left the program, the 37 "exits" represent 34 percent of the total cash initially disbursed. The bottom line: taxpayers have received $70.3 billion in principal, plus about $10 billion in dividends and warrant payments.

Nice to have had our first president with an MBA when the panic hit. Too bad we had the House Republicans....

Posted by Orrin Judd at August 28, 2009 10:57 AM