Eideard

Shhhhh! Do you hear that? Neither do I. I’m talking about reaction from critics of the auto bailout to news that Chrysler will pay back the $7.5 billion that it borrowed from taxpayers of the United States and Canada. Chrysler is raising the cash to pay back its government loans through a combination of bond sales, a commercial loan and a cash infusion from its partner Italian automaker Fiat…

Granted, all this constitutes a refinancing of Chrysler’s debt and the company is far from being out of woods – it still owes the $7.5 billion. But the fact that an automaker that had been given up for dead a few years ago is now healthy enough to convince private investors to pony up billions is a positive sign. And the chief issue among bailout critics wasn’t the long-term survival of Chrysler (they were willing to let the automaker die after all) but whether the company could ever pay back the money it borrowed from the government. Well, it just did.

So Chrysler lives to fight another day, thousands of Americans keep their jobs and the company continues to expand and post profits. Which is good news, unless you are a Toyota state Senator, are paid by a think tank to opine that government can never do anything right, or are an ideologue who’s genetically incapable of uttering the word “government” without immediately blurting out the word “boondoggle.”

Ideologue being the operative word in my humble experience. Usually, the sloganeer is someone who could care less about the lot of someone who spent decades in an auto plant – overpaid for all the fun he had schlepping fenders onto a Chrysler chassis.

Nope. I have a lot more sympathy for the folks who spent a significant portion of their lives in the not-so-healthy atmosphere of an American factory instead of the ivory tower that makes some people “superior” to those getting a paycheck for manual labor.

The US treasury expects to net $312.2m on Monday when it sells the rest of its stake in Citigroup. The government holds 465.1m warrants in Citi that entitle it to purchase common shares in the banking group. The warrants, which it is auctioning, represent the remaining part of the US government’s $45bn investment in Citi during the financial crisis.

Taxpayers are expected to end up with a $12.3bn profit on the bailout, made under the troubled asset relief programme (TARP). The treasury sold its 34% stake of common shares of Citi last year.

“As we exit our investments in private companies and recover taxpayer dollars, it’s clear that the cost of the Tarp programme will be a fraction of what many had once feared during the depths of the crisis,” said Tim Massad, the treasury’s acting assistant secretary for financial stability.

The Tarp bailout is proving to be less expensive to taxpayers than first feared. The US government made $13.5bn selling its stake in General Motors. Last week the government chose four Wall Street banks to sell its stake in American Insurance Group (AIG), recipient of $180bn in bailout funds. The sale could be the largest in US history. AIG has already paid back significant chunks of the debt…

In his latest quarterly report, Neil Barofsky said “on the financial side, Tarp’s outlook has never been better. Not only did Tarp funds help head off a catastrophic financial collapse, but estimates of Tarp’s ultimate direct financial cost to the taxpayer have fallen substantially,” from $341bn in August 2009 to $25bn in November 2010.

Save a copy of this post for the next time your friendly neighborhood Tea Party nutball starts raving and ranting about how the socialist policies of the bailout were bankrupting the United States.

Of course, you’ll have to point out 14 more sources for the information on repayment and the resulting profits. There isn’t anyone in the KoolAid Party who knows what actually is happening in the world of commerce.

Daylife/Getty Images used by permission

Former Societe Generale trader Jerome Kerviel was sentenced to three years in jail by a Paris court on Tuesday for his role in a trading scandal and ordered to pay the French bank 4.9 billion euros.

The verdict came as a victory for SocGen, which always maintained Kerviel acted alone and without the sanction of his managers at the bank. It had sought payment of damages for the money it lost unwinding the trader’s risky market bets in 2008.

Kerviel’s lawyer said he would immediately appeal the verdict, which he said was “senseless” and cleared the bank of all blame.

“Jerome is outraged … that the people who created him have been totally exonerated,” Olivier Metzner told journalists outside the courtroom in the Palais de Justice. Kerviel was given a total prison sentence of five years, two years of which were suspended. The public prosecutor had recommended Kerviel serve at least four years behind bars, with a fifth year suspended.

The payment to SocGen equates to 3.2 percent of France’s central government deficit for 2010, the GDP of Monaco or 16 percent of the French bank’s market value. Kerviel is currently paid 2,300 euros a month as a technology consultant.

RTFA for today’s details. I think I should just repeat what I said when Kerviel was arrested:

From the viewpoint of the banking IT geeks I hang out with, ignorance doesn’t beg forgiveness for culpability. If internal reports didn’t reveal the fraud, the responsibility lies with those who contracted for the systems providing the report. If the reports were there – and were ignored – the responsibility tracks deeper into the heart and management principles of the bank.

Daylife/Reuters pictures used by permission

The American International Group has reached an agreement in principle to repay the Federal Reserve Bank of New York for the company’s 2008 rescue, and to gradually return the ownership of its stock to the public markets.

Robert Benmosche, chief executive of A.I.G., said the plan would allow the company to “remain on track to emerge with one of the largest, most diversified property and casualty companies in the world.”

The company and its rescuers in the federal government have been working intently in recent weeks to complete such a plan before the expiration of the Treasury’s Troubled Asset Relief Program on Oct. 3, and before the Fed’s bailout loan came due. The original terms called for A.I.G. to pay back the Fed within two years.

Under the plan, the Treasury Department will, for a time, own 92.1 percent of A.I.G. before it begins to sell its shares…

The company said it would use its own resources to pay back the $20 billion in loans, including the proceeds it expects to receive from the sale of a big overseas life insurance unit to MetLife. That sale, announced in March, should yield $6.8 billion in cash and $8.7 billion in MetLife stock, and close by the end of the year.

Still more money to repay the Fed is expected to come from an initial public offering of a second big foreign life insurance business on the Hong Kong exchange. The offering was delayed for several months while A.I.G. tried unsuccessfully to sell the unit to a British company, but A.I.G. now says the Hong Kong offering is back on. It did not provide a time frame.

In addition, the Treasury has agreed to help the Fed sever its ties with A.I.G., by providing the means for the company to redeem most of the Fed’s $26 billion in preferred interests. That money will come from the unused portion of an emergency assistance package that the Treasury made available to A.I.G. as its troubles reached a peak in early 2009…

Taking all of those steps will end the Fed’s role as a lender to A.I.G. and an investor in the company, a role that has never fit in well with the Fed’s duties as a central bank. The Treasury will come out of the transaction with a larger preferred stake in A.I.G., but expects the company to keep taking steps to pay it down, according to the new agreement in principle.

The range of fools, from hypocrites and sophists in the Republican Party to the just-plain-ignorant tea baggers who persist in whining about TARP confound reason. Whether your concern is history or economics, the truth remains self-evident. Not only did the TARP program keep a significant chunk of our economy from collapsing in the wake of the meltdown resulting from a decade or more of Free Market corruption, our Treasury and taxpayers continue to realize a profit from the payback.

It ain’t all over. But, the process is advanced enough that even the political losers and their obedient grunts should consider climbing on board and joining the move towards the future – instead of trying to turn back both time and progress.

Wells Fargo & Co and Citigroup Inc repaid a total of $45 billion to the United States, as major banks look to reduce government influence over their affairs.

San Francisco-based Wells Fargo repaid in full the $25 billion it received in October 2008 under the government’s Troubled Asset Relief Program. Citi repaid $20 billion, but taxpayers still own common stock in the bank that is now worth about $25.2 billion.

The banks were the last two major banks left in TARP. Most of their competitors repaid the United States in June.

Exiting TARP gives banks more say over areas including employee compensation and dividends.

Last week, Wells Fargo sold $12.25 billion in stock and New York-based Citigroup sold $17 billion in common shares and $3.5 billion in convertible notes to help repay the TARP money.

In almost every case, taxpayers/Treasury made a direct profit on the repayment. Citibank shares will have to rebound – and then the US government will sell taxpayer shares – to realize that profit.