Final tally: Taxpayers auto bailout loss $9.3B (2024)
Taxpayers lost $9.26 billion on the U.S. government's automotive industry rescue program, according to a final tally released by U.S. Treasury this week.
The government said it recovered $70.42 billion of the $79.68 billion it gave to General Motors, Chrysler, Ally Financial, Chrysler Financial and automotive suppliers through the federal Auto Industry Financing Program. The program was part of the larger Troubled Asset Relief Program, or TARP.
The government lost money, but far less than initially expected when the program was launched in 2009. What's more, the program prevented GM and Chrysler from going out of business — an event most economists and automotive analysts said would have caused the entire industry to collapse and thrown the Midwest into a deep depression.
At the time, some critics argued GM and Chrysler should be allowed to fail and that government should not be interfering with the natural course of the market.
"This program was a crucial part of the Obama administration's effort to stop the financial crisis and protect the economy from slipping into a second Great Depression," U.S. Treasury Secretary Jack Lew said on Dec. 19.
The automotive industry recovered faster than most industries after the Great Recession. Sales of new cars and trucks in the U.S. have increased every year for five years and are on track to top 16.5 million this year — the most since 2006.
GM, Ford and FCA US are have all been profitable for several years. All three companies also have hired thousands of workers since 2009.
The government disbursed $49.5 billion to GM through the program, $11.96 billion to Chrysler and $17.17 billion to Ally Financial. As part of the plan, Fiat took control of Chrysler. The companies have since merged, and the new entity is called Fiat Chrysler Automobiles — with its U.S. arm called FCA US.
On Dec. 18, the Treasury sold all of its remaining stock in Ally Financial and closed the program. Treasury recovered a total of $19.57 billion from sales of Ally stock, a $2.4 billion profit. Before 2008, Ally was GMAC, the finance arm of GM. In December 2008, it became certified as a bank holding company, a step that made it eligible for the government bailout.
FCA US repaid its loans in June 2011. In December 2013, Treasury sold its last GM shares.
The final tally for the program was included in the Treasury's daily TARP update on Monday.
"The cost of a disorderly liquidation to the families and businesses across the country that rely on the auto industry would have been far higher," the Treasury Department said of the expense. "The government's actions not only saved GM and Chrysler, but they saved many businesses up and down the supply chain."
Last year, the Ann Arbor, Mich.-based Center for Automotive Research estimated that the U.S. would have had 2.6 million fewer jobs in 2009 and 1.5 million fewer jobs in 2010 if the two auto companies had disappeared. The study also estimated the government "saved or avoided the loss of" $105 billion in lost taxes and social service expenses, such as food stamps, unemployment benefits and medical care.
Among those jailed were Charles Keating Jr., whose Lincoln Savings and Loan cost taxpayers $3.4 billion, and David Paul, who was sentenced to 11 years in prison for his role in the $1.7 billion collapse of Centrust Bank.
According to data from the Federal Deposit Insurance Corporation's (FDIC) Division of Research and Statistics, 1,617 commercial and savings banks failed between 1980 and 1994. These failed institutions held roughly $206.2 billion in assets.
The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of 32% (1,043 of the 3,234) of savings and loan associations (S&Ls) in the United States from 1986 to 1995.
The Great Recession lasted from roughly 2007 to 2009 in the U.S., although the contagion spread around the world, affecting some economies longer. The root cause was excessive mortgage lending to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender.
The financial crisis of 2008 altered so many lives: Millions of people lost their homes, their jobs and their savings. It set off a recession that collectively destroyed over $30 trillion of the world's wealth.
The crisis resulted in thousands of savings and loan institutions closing and billions of dollars lost, hurting customers and taxpayers. The crisis led to many banking reforms being put in place, but not enough so to avoid another crisis that occurred between 2007–2008, leading to the Great Recession.
Washington Mutual, which was heavily involved in risky mortgages and became the largest bank to fail in U.S. history, was sold to JPMorgan Chase. In recent years, fewer banks have gone under, thanks in part to stricter regulations that were put in place in the wake of the financial crisis.
There are 4 bank failures in 2023. See detailed descriptions below. Please select the buttons below for other years' information. Dream First Bank, National Association, to assume all of the deposits and substantially all of the assets of Heartland Tri-State Bank.
The collapses of First Republic Bank, Silicon Valley Bank and Signature Bank were the second-, third- and fourth-largest bank failures in the history of the United States, respectively, smaller only than the collapse of Washington Mutual during the 2007–2008 financial crisis.
Banks are tightening their credit standards and increasing their loan pricing over deposit costs, according to the Fed's latest Senior Loan Officer Opinion Survey. My judgment call remains that the recession will begin in the first half of 2024, or possibly late in 2023.
Recessions and housing market crashes may cause your house's value to decrease. However, your set mortgage rates won't lower, meaning your monthly payments will be higher than your home's worth. While many may dip into their savings to help pay the steep bills, others may need outside assistance.
The Great Depression lasted from 1929 to 1939 and was the worst economic downturn in history. By 1933, 15 million Americans were unemployed, 20,000 companies went bankrupt and a majority of American banks failed.
Earnings Recession in 2023 to Transition to Strong Recovery in 2024. Morgan Stanley Research strategists think U.S. corporate earnings could decline 16% in 2023 but stage a comeback in 2024 and 2025.
The most important part of building wealth during a recession is investing as much as possible in the stock market. Take steps to ensure you'll have stable income, like starting a side hustle or working on your skills.
Most respondents to the 2022-2023 Global Risks Perception Survey (GRPS) chose “Energy supply crisis”; “Cost-of-living crisis”; “Rising inflation”; “Food supply crisis” and “Cyberattacks on critical infrastructure” as among the top risks for 2023 with the greatest potential impact on a global scale (Figure 1.1).
NEW YORK (AP) — The Justice Department accused Los Angeles-based City National Bank on Thursday of discrimination by refusing to underwrite mortgages in predominately Black and Latino communities, requiring the bank to pay more than $31 million in the largest redlining settlement in history.
In the 1980s, there was a financial crisis in the United States that stemmed from skyrocketing inflation as well as the rise of high-yield debt instruments, called junk bonds, which resulted in the failure of more than half of the nation's Savings & Loans institutions (S&Ls).
Americans attributed the cause of the panic principally to domestic political conflicts. Democrats typically blamed the bankers, and Whigs blamed Jackson for refusing to renew the charter of the Bank of the United States and on the withdrawal of government funds from the bank.
The Panic of 1907 was a financial crisis set off by a series of bad banking decisions and a frenzy of withdrawals caused by public distrust of the banking system. J.P. Morgan and other wealthy Wall Street bankers lent their own funds to save the country from a severe financial crisis.
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