Buffett Tells Country, TARP Gave Over $1 Billion To Goldman Sachs
Dean Baker
Dean Baker is the co-director of the Center for Economic and Policy Research
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At a time when all the tough guys in Washington are making plans to cut Social Security and Medicare benefits for high-living seniors and to cut Head Start for low-income kids, it was generous of Warren Buffett to point out that we taxpayers gave over $1 billion to Goldman Sachs through TARP. Buffett probably didn't intend to point out this fact to the country, but it is an unavoidable implication of his $2 billion profit on his loans to Goldman.
Buffett made his $5 billion loan to Goldman about a week before the Treasury lent $10 billion to Goldman through the TARP program. Buffet got 10 percent interest on his loans, while the Treasury got 5 percent on its loans. In addition, Buffett got a much more generous commitment of stock warrants, which is the basis of the $2 billion in profits that he is now set to pocket.
The Treasury boasted of getting a $1.1 billion profit on its loans to Goldman, but as Mr. Buffet showed, this was far below the market rate of interest on loans to Goldman at the time. The difference between the return received by Buffett and the return received by the Treasury was in effect a gift from taxpayers to the top executives at Goldman and their shareholders. When Treasury Secretary Geithner and other officials claim that the government made money on the TARP loans it is either due to their ignorance of the workings of financial markets or a deliberate effort to deceive the public.
It is also worth noting that the TARP money was only a portion of the extraordinary assistance that the taxpayers have given Goldman's top executives and shareholders. The FDIC also guaranteed tens of billions of loans to Goldman. Goldman was allowed to borrow tens of billions of dollars from the Fed at below market interest rates. And it was allowed to become a bank holding company, and thereby gain the protection of the Fed and the FDIC, at the peak of the crisis, averting a run that which would almost certainly have been fatal.
In addition, Goldman benefits from the implicit subsidy of its "too big to fail" status, the belief that the government will bail it out if it gets into trouble. This allows it to borrow in credit markets at a lower cost than if it did not have implicit government protection.
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Read more: http://www.businessinsider.com/buffett-tells-country-tarp-gave-over-1-billion-to-goldman-sachs-2011-3#ixzz1H4W6lVHE
But Dean Baker, like so many adults today, has no integrity. He simply wants to embellish his way to celebrity status. Lets hope Andy Warhol was right and Baker gets only 15 minutes of fame. He does not deserve respect.
we continue to get the best government that money can buy. the solution is simple, but runs counter to the interests of the largest financial entities. banks need access to cheap federal funds. bank deposits are insured. these are policies that help banks & consumers alike. that we repealed glass-steagal, and allowed banks to merge with brokers, investment arms, etc is crazy... except for the pockets of the financial conglomerates. these guys should be broken up. the banks stay eligible for bailout. the rest should be on their own. even beyond the crisis bailouts, we continue to give the financial giants access to taxpayer funds... some of which is invested quite speculatively. no wonder lending is tight. why would a bank lend its reserves for relative peanuts when it could do complex private equity deals (e.g. chase's recent proposed investment in twitter).
but when government can't stand up to private power, we're doomed.
Yes he is a Wall Street shill, and probably so is the person who wrote this article.
Please read Michael Lewis' great essay "the Temptation of St. Warren" if you want an accurate portrayal of "Saint" Warren.
It's not just the U.S. The Irish taxpayer is in the business now of bailing out Germany & France's banks. Call it socialized losses, free market gains. Any way you slice it the banks and bankers got a gift and the taxpayer got the shaft. Now the "shaft" is looking for new victims and appears to have found preschoolers and the sick and teachers and firemen.
It sure seems to me that Corporations & Banks buy these favorable laws. Surprising to me, is that the Supreme Court thinks the nation needs more of this money/speech buying of Congress & State Houses.
No strings attached just a blank check. Why?
It must p/o every tax payer in the country that the government can do this. We need to vote them out of office or recall them. It has been done before and will be done again. Corruption in government can and will not be tolerated by the average Joe.