# Was TARP the right thing to do? **URL:** \ **Category:** Great Debates\ **Created:** [May 20, 2010, 9:03pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181 "2010-05-20T21:03:10Z")\ **Posts on this page:** 19\ **Page:** 2
**Author:** ![Death\_of\_Rats](https://avatars.discourse-cdn.com/v4/letter/d/a6a055/32.png) [@Death\_of\_Rats](https://boards.straightdope.com/u/Death_of_Rats)\ **Post date:** [May 28, 2010, 2:49pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/21 "2010-05-28T14:49:00Z")
> [@Tom\_Tildrum](#): > > … > Loans to the car companies are also likely to be large losses, and it’s hard to see those as necessary to the larger economy, rather than simply politically driven. As a person who works for a company that is a supplier to the Big Three I would disagree with you on this last point. The collapse of GM (who just turned their first profitable quarter in three years) would have been devastating to economies and industries far beyond just the car makers themselves. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [May 28, 2010, 3:13pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/22 "2010-05-28T15:13:40Z")
> [@LonghornDave](#): > > Why don’t you provide this legal definition. Yes. Why don’t I. Insurance regulations vary by state, so there are potentially 50 different definitions of “insurance”. I’m not a lawyer, so I can’t speak about similarities between various states’ laws, but [here’s a cite](http://economicsofcontempt.blogspot.com/2009/07/cds-are-not-insurance-contracts.html) showing both the New York State definition of “insurance contract”, as well as the New York insurance office’s legal conclusion that CDS are not, in fact, insurance. (This is an important finding because most CDS, as EoC says, are based on New York law.) [CDS are swaps.](http://blogs.reuters.com/felix-salmon/2009/07/04/why-insurance-commissioners-should-not-regulate-cds/) They can be used to hedge investments, sure, although the majority of CDS were in naked positions, where the purchaser of the CDS didn’t actually own the protected asset. That’s one essential legal difference between CDS and insurance. I can’t take out an insurance contract on the possibility that _your_ house will burn down. But even if they’re used as hedges, they still don’t work like insurance contracts. If I buy a bond, I can buy an insurance contract in case there’s a default on the bond. But it’s binary. Either there’s a default or there isn’t. A CDS can be a bit more flexible than that. I can buy a CDS contract to hedge my investment in the bond, and for a fee be protected even if the bond drops in value. It’s not an either/or situation like a traditional insurance contract. CDS aren’t insurance. That’s a useful short-hand for thinking about them in the case of hedging exposure, but the contracts still work differently. And this is why they were largely unregulated, a part of the “shadow banking” system that people like Greenspan thought would take care of itself through the magic of the market. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [December 18, 2010, 3:27pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/23 "2010-12-18T15:27:59Z")
> [@LonghornDave](#): > > TARP probably shouldn’t be considered simply on a stand alone basis. We should really be looking at all of the various programs that the government put in place. > > The latest estimate from the Treasury Department is that TARP will end up losing a little over $100 billion. This will all be from the auto companies, AIG, and the Home Affordable Modification Program. The money provided to banks under the capital purchase program under TARP is projected to generate about a $17 billion gain for the government. > > The various Maiden Lane facilities are projected to make money. > > **All funds loaned under the Term Securities Lending Facility (TSLF), Primary Dealer Credit Facility (PDCF), Commercial Paper Funding Facility (CPFF), and Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) have been repaid in full with interest.** The Fed does not anticipate losing any money on the Term Asset Backed Securities Loan Facility (TALF). At one point the funds loaned under these various facilities was around $2 trillion. It is now around $300 billion with no anticipated losses. > > Just about everything sounds pretty good with one huge exception. The money given to the Government Sponsored Entities of Fannie Mae and Freddie Mac look like a tremendous loser. A recent estimate of the losses of the GSEs is around $450 billion. I know I am bumping an old thread, but wanted to make a correction to the above post. It has come to light recently that Goldman Sachs repaid tarp not with real money, but with worthless mortgage backed securities. If this is not another clear sign how our government and wall street work together at the expense of the majority of Americans, I don’t know what else to say. Totally Busted: The Truth About Goldman’s Bailout by the Fed > **[Totally Busted: The Truth About Goldman's Bailout by the Fed](https://www.economicpolicyjournal.com/2010/12/totally-busted-truth-about-goldmans.html)** > > Robert Wenzel By repaying its TARP loan, for example, Goldman wriggled out from under the nettlesome compensation limits imposed by TARP, while also conveying an image of financial strength. But this “strength” was illusory. Goldman repaid the TARP loans with funds it procured days earlier from the Federal Reserve. Then, over the ensuing months, **Goldman recapitalized its balance sheet by selling tens of billions of dollars of mortgage-backed securities to the Fed.** Government plus Wall Street = Crooks R US ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 18, 2010, 6:25pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/24 "2010-12-18T18:25:12Z")
I spent 7 years working for the big banks including a year in the Lehman Brothers HK fixed income group. TARP absolutely saved the global economy that was very close to going over a cliff. Actually, let’s give kudos to the Bank of England and the Exchequer for wading in _ **first** _. The UK’s expedient action helped stem the tide. Let’s put it a different way, I “heard” rumors that letters of credit were starting to not be honored. If LC’s don’t work, then global trade collapses. I am still incensed that Hanky Panky Paulsen gave such sweatheart terms to the banks and the Fed paid out 100% of the AIG claims. The banks were all going to go bankrupt because of short term cash flow problems, and Paulsen should have charged them up the ass for the pleasure of being bailed out. Not this IIRC 10% ROI the government got for CITI. The government should have gotten 5 years worth of ibank profits or hell at least as good a deal as Warren Buffet got out of Goldman (much better than Uncle Sam). And Wall Street was praying they would get somethng out of AIG but no one was expecting a 100% payout. The Street never pays out 100% on a settlement, so that was another big present from US taxpayers to Wall Street and the other big global banks. The financial regulation bill is like a band aid on a bullet wound. It is not protecting our banking system. I’m all for Glass Stegal v2 coming. I worked in the Industry in the 1990’s before the deregulation flood gates opened up. It was a much safer financial world and banks took risk very seriously. ---
**Author:** ![bashere](https://avatars.discourse-cdn.com/v4/letter/b/779978/32.png) [@bashere](https://boards.straightdope.com/u/bashere)\ **Post date:** [December 19, 2010, 12:18am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/25 "2010-12-19T00:18:39Z")
> [@Dante\_Fevah](#): > > Funny thing is if we go back and see what was written… > > Obama saved the national and maybe world economies. It is now time to make sure we can get healthy. > > disclosure: I did not vote 4 Obama I’m not sure exactly what you mean, but my post was unclear. I think TARP was probably the best that could have been done under the circumstances. ---
**Author:** ![randy054](https://avatars.discourse-cdn.com/v4/letter/r/54ee81/32.png) [@randy054](https://boards.straightdope.com/u/randy054)\ **Post date:** [December 19, 2010, 1:02am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/26 "2010-12-19T01:02:50Z")
> [@bashere](#): > > I’m not sure exactly what you mean, but my post was unclear. I think TARP was probably the best that could have been done under the circumstances. I disagree, the best thing would to have let it collapse, otherwise, the parasites like these continue to hold their grip at everyone else’s expense. > [@](#): > > A Secretive Banking Elite Rules Trading in Derivatives > > The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential. > > Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk. > > In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks. > **[A Secretive Banking Elite Rules Trading in Derivatives (Published 2010)](https://www.nytimes.com/2010/12/12/business/12advantage.html)** > > In theory, clearinghouses exist to safeguard the integrity of the multitrillion-dollar derivatives market. In practice, they also defend big banks’ dominance. Their the scum of the earth worse than Hitler. and this as well: > [@](#): > > The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available. So much for their free market mantra ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [December 19, 2010, 1:40am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/27 "2010-12-19T01:40:45Z")
> [@Dante\_Fevah](#): > > You cannoy gte on baord becuase you need assestense? You of all people have no cause mocking me for bad spelling. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 20, 2010, 6:20am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/28 "2010-12-20T06:20:41Z")
> [@Sandwich](#): > > I appreciate the sentiment, but letting an insurance company go under is not the same as letting a bank fail. In theory, banks can go bust. In theory, insurance companies are tightly regulated to prevent the risk of failure. The US government admitting that it doesn’t regulate insurance companies properly, to the extent that creditors are not paid, is not a trivial step. > > Of course, AIG might not be an insurance company, but that might not help the US government’s credibility either. > > Just a suggestion. The federal government does’t regulate insurance companies at all. There’s actually a law about that. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 20, 2010, 7:21pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/29 "2010-12-20T19:21:56Z")
> [@Damuri\_Ajashi](#): > > The federal government does’t regulate insurance companies at all. There’s actually a law about that. This is clearly not true. You would be better off saying something like the majority of insurance regulation occurs at the state level. Clearly there are a number of federal regulatory agencies that oversee major insurance companies. For example, obviously MetLife is a large insurance company with operations in most basic insurance lines. They are regulated by the Federal Reserve, FDIC, Office of the Comptroller of the Currency, SEC, and Treasury at a minimum. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 20, 2010, 8:25pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/30 "2010-12-20T20:25:25Z")
> [@randy054](#): > > I know I am bumping an old thread, but wanted to make a correction to the above post. How about you point out a single thing incorrect about my post? As far as I can tell, you selected my post, said you were going to make a correction, never stated what you were correcting, then posted a bullshit conspiracy theory “article” without bothering to do any fact checking on it. **So, please tell me specifically what I said incorrectly that you needed to correct?** > [@randy054](#): > > It has come to light recently that Goldman Sachs repaid tarp not with real money, but with worthless mortgage backed securities. Is that a fact? Isn’t it massively more likely that they paid off the TARP funds with proceeds from an equity issuance that they completed immediately before the payoff plus cash on hand? I mean, do you not see how absurdly stupid this conspiracy theory is? What are you saying here, that they were in such good graces with the federal government that they were able to repay billions of dollars by giving something of no value to the government? Then what did they do with the billions of dollars that they raised through the public markets immediately before hand? Further, why would the government then turn around and sue them here in 2010 if they were in such good graces with them in 2009? > [@randy054](#): > > If this is not another clear sign how our government and wall street work together at the expense of the majority of Americans, I don’t know what else to say. Completely clear to someone who wants to ignore the massive amount of publicly available information that completely contradicts everything in your ridiculous article. [Here is Goldman’s 10-K filing for 2009.](http://www.sec.gov/Archives/edgar/data/886982/000095012310018464/y81914e10vk.htm) Chances are, if you want to know the detail behind anything they did related to capital issuances, payoffs, or interactions with the government, it is provided here in more detail then you would care to know. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 20, 2010, 8:35pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/31 "2010-12-20T20:35:24Z")
> [@China\_Guy](#): > > I am still incensed that Hanky Panky Paulsen gave such sweatheart terms to the banks and the Fed paid out 100% of the AIG claims. The banks were all going to go bankrupt because of short term cash flow problems, and Paulsen should have charged them up the ass for the pleasure of being bailed out. Not this IIRC 10% ROI the government got for CITI. The government should have gotten 5 years worth of ibank profits or hell at least as good a deal as Warren Buffet got out of Goldman (much better than Uncle Sam). The government received a 27% return on its Citi investment. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 21, 2010, 3:32am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/32 "2010-12-21T03:32:14Z")
> [@LonghornDave](#): > > The government received a 27% return on its Citi investment. not to be snarky but do you have the numbers? IMHO Citi should have been held accountable for a metric buttload more otherwise they would be DOA. Not to mention Citi may have to go back to the government teat since there’s a lot of account gimmicks in there (FASB 68 I believe is one). ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 21, 2010, 7:01am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/33 "2010-12-21T07:01:29Z")
Longhorn - do you have a clear cite on the numbers? In 15 minutes of searching, I couldn’t find anything that laid out the big picture that well. This one says Uncle Sam should get about a [$12B payback](http://www.twincities.com/news/ci_16793908?source=rss&nclick_check=1)against the $45B bailout. That’s close to a 30% return over 2 years (from a pure payback basis). I would argue that is probably not a great ROI based on the risk taken (and the implied future guarantee). And this article says that Uncle Sugar has [forgone billions (?) in taxes.](http://www.dailymail.co.uk/news/article-1336418/US-government-expect-taxpayers-profit-9-4bn-Citigroup-Inc-bailout.html)It’s very thin on details though. But if true, would drive the ROI much lower. I just did a quick search but can’t find which FASB rule change it was. However, if someone out there knows, please jump in. The ruling I’m thinking of is the change around spring of 2009 from “mark to market” rules for many securities including illiquid derivative products to valuing such investments at PAR if these are intended to hold to maturity. Whilst this makes sense on some levels, it does allow banks to value mortgaged backed securities at 100 cents on the dollar when the reality is that even at maturity in 20 years a significant number of these financial products will be worth a fraction of the face value. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [December 21, 2010, 1:09pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/34 "2010-12-21T13:09:13Z")
> [@China\_Guy](#): > > This one says Uncle Sam should get about a [$12B payback](http://www.twincities.com/news/ci_16793908?source=rss&nclick_check=1)against the $45B bailout. That’s close to a 30% return over 2 years (from a pure payback basis). I would argue that is probably not a great ROI based on the risk taken (and the implied future guarantee). That link does not work for me - the article is no longer available. I wonder if **longhorn** is thinking of the government’s stake in Citibank - which was 27% ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 21, 2010, 4:57pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/35 "2010-12-21T16:57:44Z")
> [@China\_Guy](#): > > Longhorn - do you have a clear cite on the numbers? In 15 minutes of searching, I couldn’t find anything that laid out the big picture that well. > > This one says Uncle Sam should get about a [$12B payback](http://www.twincities.com/news/ci_16793908?source=rss&nclick_check=1)against the $45B bailout. That’s close to a 30% return over 2 years (from a pure payback basis). I would argue that is probably not a great ROI based on the risk taken (and the implied future guarantee). [Here](http://www.financialstability.gov/latest/pr_12102010.html) is a cite directly from the Treasury Department. [QUOTE=Treasury] Treasury invested a total of $45 billion in Citigroup pursuant to TARP (and made a $5 billion commitment under the Asset Guarantee Program that was never funded). With this offering, Treasury has recovered all of the $45 billion plus approximately $12 billion in profits, consisting of dividends, interest, and gains on the sale of Citigroup common stock and other securities. [/QUOTE] Note that the 27% return is a simple return ($12 profit divided by $45 investment). I didn’t have the exact dates handy for all of the cash inflows and outflows, so I didn’t attempt to determine an annualized rate of return. I would agree with you that the rate of return is not great although it is better than I initially expected it to be. Certainly Citi was in some major trouble when they were bailed out by the Treasury. I thought it would be a long time before we ever saw that money again. Of course, you also have to take into account that the Treasury didn’t exactly take steps to maximize their return. Per my above link, the weighted average sales price of the shares sold was $4.14. The price of Citi’s stock as I type is $4.74. That would have been an additional $4.6 billion return. A different investor than the Federal government may have held on longer. > [@China\_Guy](#): > > And this article says that Uncle Sugar has [forgone billions (?) in taxes.](http://www.dailymail.co.uk/news/article-1336418/US-government-expect-taxpayers-profit-9-4bn-Citigroup-Inc-bailout.html)It’s very thin on details though. But if true, would drive the ROI much lower. The argument that we have forgone billions in taxes is extremely shaky in my opinion. Essentially, Citi had a large deferred tax asset on its balance sheet prior to the government bailout. I’m not a tax accountant, but my understanding is that this asset would normally be written off during a change of control. The obvious reason is that you would want to avoid having companies acquire others that have large deferred tax assets simply for the purpose of avoiding their own tax liabilities. The issue was whether or not the government’s investment in a bailed out company should be considered a change of control event. The IRS and Treasury said that it would not qualify thus allowing Citi to retain the deferred tax asset on their books. Others are saying that allowing them to retain that deferred tax asset is itself a bailout as by the strict letter of the law, the bailout should be considered a change of control event. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 21, 2010, 6:08pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/36 "2010-12-21T18:08:36Z")
> [@China\_Guy](#): > > I just did a quick search but can’t find which FASB rule change it was. However, if someone out there knows, please jump in. The ruling I’m thinking of is the change around spring of 2009 from “mark to market” rules for many securities including illiquid derivative products to valuing such investments at PAR if these are intended to hold to maturity. Whilst this makes sense on some levels, it does allow banks to value mortgaged backed securities at 100 cents on the dollar when the reality is that even at maturity in 20 years a significant number of these financial products will be worth a fraction of the face value. You are thinking of [FAS 157](http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820931833&blobheader=application%2Fpdf). Obviously this pronouncement got a lot of attention at the time, but it makes a good deal of sense when you think about it. Also, it is not nearly as simple as saying that if the company intends to hold the asset to maturity then they can value it at par. First, they have to prove the ability to hold it to maturity. Second, they still have to impair the value of the security if there is a credit issue. See the following. [QUOTE=FAS 157] This Statement clarifies that a fair value measurement for a liability reflects its nonperformance risk (the risk that the obligation will not be fulfilled). Because nonperformance risk includes the reporting entity’s credit risk, the reporting entity should consider the effect of its credit risk (credit standing) on the fair value of the liability in all periods in which the liability is measured at fair value under other accounting pronouncements, including FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. [/QUOTE] Basically, if the instrument is not impaired from a credit standpoint and you have the ability to hold it to maturity, you don’t need to write down the value simply because the tradeable value of it has been reduced. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [December 21, 2010, 6:29pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/37 "2010-12-21T18:29:50Z")
> [@amarone](#): > > That link does not work for me - the article is no longer available. I wonder if **longhorn** is thinking of the government’s stake in Citibank - which was 27% The Treasury actually owned higher than that. Per Citi’s [9/30/09 10Q](http://www.sec.gov/Archives/edgar/data/831001/000104746909009754/a2195256z10-q.htm#ce17001_significant_events_in_the_third_quarter_of_2009), it was 33.6% of the common stock. [QUOTE=10Q] As a result of the exchange offers, the UST owned approximately 33.6% of Citigroup’s outstanding common stock, not including the exercise of the warrants issued to the UST as part of TARP and pursuant to the loss-sharing agreement. [/QUOTE] ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [December 21, 2010, 7:38pm UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/38 "2010-12-21T19:38:07Z")
> [@Dante\_Fevah](#): > > Funny thing is if we go back and see what was written… > > Obama saved the national and maybe world economies. It is now time to make sure we can get healthy. > > disclosure: I did not vote 4 Obama You mean Bush? > [@wiki](#): > > The Troubled Asset Relief Program, commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector which was signed into law by U.S. President George W. Bush on October 3, 2008 TARP = Bush Stimulus = Obama. Glad we got that cleared up. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [December 23, 2010, 4:04am UTC](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181/39 "2010-12-23T04:04:27Z")
Thanks Longhorn. As I understand from my buddies that are still in the business, FAS 157 was a huge boon to the banks. “Should consider the credit risk” is a huge out. Citi and the other banks likely have not written off what they should, and will end up with a Japanese post bubble experience. So, simplistically Uncle Sugar got a 13% return per year. Not great compared to the risk that was taken. For example, if Citi had gone to a venture capitalist for funding (not that that is a realistic scenario), they would have given up something north of 75% of the stock. Also Citi remains too big to fail and carries an implicity US Government guarantee, which is not valued into the return. [Previous page](https://boards.straightdope.com/t/was-tarp-the-right-thing-to-do/540181.md?page=1)