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Opinion: Auto And Bank Bailouts Prove Effective

Treasury Secretary Timothy Geithner testifies to Congress on the AIG bailout (Photo by Ann Heisenfelt/Getty Images)

Treasury Secretary Timothy Geithner testifies to Congress on the AIG bailout (Photo by Ann Heisenfelt/Getty Images)

The Buck Starts Here

One of the signs that we are better off than we were four years ago comes in the form of a press release from the Treasury Department.

Following the bailout of American International Group (AIG) in September 2008 – as financial markets went into meltdown – no one thought the US taxpayers would see much of the money spent to bailout the banking system returned.

For AIG, that meant that taxpayers would break even on the investment at $28.73 a share. As the crisis unfolded and financial industry stocks plummeted, AIG went below $6.00 a share. Many thought taxpayers would never see anything positive from their investment.

On Monday, the Treasury Department sold 553,846,153 shares in AIG on Monday, turning an $18 billion profit on the $32.50 a share price.

In May, the Government Accountability Office estimated that taxpayers will gain a profit of around $15 billion from the AIG bailout.

Amazingly, that number could actually be lower than the final result.

Also significant is that the U.S. Government is now a minority share holder in AIG, cutting its stake in the company from 53.4% to 21.5%.

According to the Treasury Department press release, Treasury and the Federal Reserve “have now recovered a combined total of $194.7 billion … representing a positive return of $12.4 billion to date compared to the original combined $182.3 billion commitment. Future sales of Treasury’s remaining AIG common stock holdings will provide an additional return to taxpayers.”

So, to date, tax payers have profited $12.4 billion from the AIG bailout that helped rescue our financial industry which is on much sounder footing.

Likewise, the auto bailout helped rescue the job market.

The financial crisis served as a catalyst for a weakened auto industry to teeter on the precipice of collapse.

Especially in states like Michigan, Ohio, Pennsylvania and Wisconsin where families and entire small cities depend on the auto industry the effects would have been devastating.

The General Motors and Chrysler bailouts preserved jobs beyond just the auto industry across those states, and many others, and now the Ohio economy is better than the national economy as a result.

Four years ago, few thought the auto industry would rebound so fast or maybe rebound at all. Many, including Mitt Romney, recommended that we let the auto industry, and Detroit, go bankrupt.

Today the auto industry is on the rise. Shuttered factories are opening. Open factories are adding jobs and adding shifts. Communities once headed towards collapse have been revived.

We do not know how bad things would have gotten without the bailouts but one thing is certain. We are better off than we were four years ago and the bailouts look like much better bets than they did in 2008 and 2009.

The bailouts were not popular. But they were effective. And every month we get fresh evidence that they performed better than expected.

About Bill Buck

Bill Buck is a Democratic strategist, President of the Buck Communications Group, a media relations and new media strategies consulting business based in Washington, DC, and Managing Director of the online ad firm Influence DSP. He has over twenty years of international and national communications experience. The views and opinions expressed in this post are those of the author and do not necessarily reflect the official policy or position of CBS Local.

 

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