Bank bailout brings partial returns so far

WASHINGTON - A gaggle of big banks has repaid loans to the government under last fall's $700 billion financial rescue.

But that does not mean the government is out of the hole yet. The question remains whether taxpayers eventually will recoup the rest of the money spent on this and other bailouts - and maybe even take in a little profit.

Here are some questions and answers about recovering the bailout money.

Question: Which banks have repaid their government loans?

Answer: The government injected capital into hundreds of banks under the Treasury Department program set up in October after the financial system - and U.S. officials - peered into the abyss of collapse. A towering scaffold of other government programs, including tens of billions in Federal Reserve emergency loans and FDIC guarantees for debt issued by banks, sprang up to ward off financial catastrophe.

It totaled close to $1 trillion, pumping up the federal deficit.

In June, banks began repaying the money they received under the Troubled Asset Relief Program, or TARP. The "repayers" so far include some of the nation's biggest and best-known banks. Among them: JPMorgan Chase & Co., Morgan Stanley, Goldman Sachs Group Inc., U.S. Bancorp, American Express Co., BB&T Corp., Bank of New York Mellon Corp., and Northern Trust Corp.

Q: Did the government earn any profit when the money was paid back?

A: The government has made about $4 billion from the eight aforementioned institutions and an additional $35 million from 14 smaller banks, according to calculations by the New York Times in a report published Sunday.

In return for the government aid, the banks issued the Treasury warrants to buy their common stock at a set price over the next 10 years, and preferred shares carrying a 5 percent annual dividend rate. The government's profit comes from those dividends and increases in stock prices.

Q: So it's all good, right? The government is getting a healthy return on its emergency investment in the banks?

A: Not exactly. While some banks that received TARP money have paid it back, many have not - including banking giants Citigroup Inc. and Bank of America Corp., which each received $45 billion.

Some of the banks may never repay the money.

And there is the possibility of big losses for the government on its rescues of mortgage-finance companies Fannie Mae and Freddie Mac (combined $96.3 billion in government money so far), insurance conglomerate American International Group Inc. ($182 billion), and carmakers General Motors Co. and Chrysler Group L.L.C. (combined $65 billion).

For the bank bailout, "It's probably a break-even for the government," said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pa.

Q: Didn't the government say there wouldn't be a loss on the investment when it asked Congress for the bailout money last fall?

A: It did, though profit was the least concern at a time when financial disaster was at hand and the economic ship needed to be righted.