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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: longnshort who wrote (612712)	5/24/2011 4:21:04 PM
From: TimF	Respond to of 1576605

Will I Lose My TARP Bet? Bryan Caplan Back in 2008, I made the following bet: "If the Director of the OMB's 2013 report says that a shortfall exists, I win. Otherwise, I lose. The stakes: I will make up to five $100 bets at even odds." Now it seems like I'll lose: " "Treasury currently estimates that bank programs within TARP will ultimately provide a lifetime profit of nearly $20 billion to taxpayers," Treasury said in a recent news release. But if taxpayers make $15 billion off AIG alone, the total figure could climb much higher. " At the time, friends warned me that creative accounting would kill me. Looks like they were right: True, the notion of a TARP "profit" requires some creative accounting. "As numerous critics have pointed out, much of the reason for the windfall comes from the removal of much of the toxic crap from bank balance sheets onto the already hideous balance sheets at Fannie Mae and Freddie Mac. The National Taxpayers Union calls the profit "a myth, a fiction of Washington accounting...because the banks that got bailed out through TARP shuffled all their bad assets over to Fannie Mae and Freddie Mac, which got their own separate bailout. So, really, it should be no surprise that they're relatively healthy." " I always took this possibility seriously, but was willing to bet that I'd win despite creative accounting. Any chance the next two years will vindicate me?... econlog.econlib.org Yancey Ward writes: Wasn't some of TARP used on the car companies? In fact, I seem to remember that the total amoun used to float GM and Chrysler amounted to more than the bank portion is claimed to have made in profit. And, yes, it isn't a profit if the banks return money that came from the injections made by the Treasury to Freddie and Fannie. Also, to generate that $20 billion, how much did the US government have to borrow for that period of time? What else could we have done with it? econlog.econlib.org Jeremy, Alabama writes: Not just creative accounting, but creative lawmaking. If, as in the case of GM and Chrysler, you can defraud the existing creditors and shareholders, and give a sweetheart tax deal for a decade, prop up their car loans business, and give money or lend at ultra-low rates for "green" tech, then it might be possible to demonstrate a profit. I've mentioned this before, but my father-in-law is a Belarussian director of a fish farm. He told me "it used to be very profitable, when the Soviets sent us the fish food for free". This is classic socialist accounting - and in fact it is impossible to determine the true profit-and-loss of any business entangled with the govt. econlog.econlib.org Porter Stansberry writes: What if you measured in gold...? The main reason the TARP shows a "profit" is the unprecedented amount of fiscal and monetary stimulus we've seen since November 2008. When you print enough funny money, everyone's balance sheet looks great...no matter how many people are starving. As my friend Dan Ferris says: When there's no limit to money, there's a shortage of everything else. econlog.econlib.org