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The Bailout in the US: By actual numbers

While Democrats paint a glowing picture of the bailout, ProPublica’s Bailout Tracker database tells the whole story. A look at the biggest losses and gains stemming from the TARP and Fannie, Freddie bailouts in the US

 
Quick, how many billions in the red are taxpayers on the bailout of GM? AIG? Fannie and Freddie? Is it true that the government has reaped a profit from bailing out the banks?
It should be easy to find answers to such questions. But while it's a snap to find rosy administration claims about the bailout, finding hard numbers is much more difficult. That's why, since the bailouts began in 2008, we've maintained a frequently updated site to provide them. Now we've retooled our database to make it even easier to find these sorts of answers.
 
So you can effortlessly discover that it's $27 billion for GM, $23 billion for AIG, $91 billion for Fannie, $51 billion for Freddie, and yes, the bank investments have so far returned a profit of $19 billion.
 
We also make it easy for you to see which investments have resulted in losses (39 so far in total) and to sort bailout recipients by how far in the red or black they are. As always, our scorecard page adds it all up and shows where both bailouts — the Troubled Asset Relief Program, better known as TARP ($55 billion in the red) and Fannie and Freddie (negative $142 billion) — stand right now.
 
Ultimately, the bailout of GM seems likely to result in the TARP's single biggest loss. But since the government still holds about a third of the company's stock (currently worth about $10 billion), we don't include it on our list of losers yet. It's possible the government will sell the stock for more than it's currently worth, recouping more of its investment.
 
For now, the reigning bust is the $2.3 billion investment in the bank CIT, which landed in bankruptcy less than a year after its bailout. Second on the list is Chrysler, which resulted in a $1.3 billion loss.
 
"The government's financial stability programs are expected to cost far less than many had once feared during the crisis, and we're continuing to make significant progress recovering taxpayer investments," said a Treasury spokesman.
Over time, that list of losing investments is likely to grow far beyond 39, because many of the smaller banks that have yet to repay the government are struggling. Although more than 300 banks have exited TARP (often repaying with money from another government bank program), nearly 400 remain. Of those, 162 are behind on their dividend payments to the Treasury Department. According to the GAO, the banks that are languishing in TARP tend to be weaker than those that have left, and at least 130 appear on a secret "problem bank" list kept by regulators.
 
The TARP's main bank program was supposed to be reserved for healthy banks, but among the losing investments are banks that were troubled even when they first received the money. Central Pacific Financial, a Hawaii bank, got its $135 million in early 2009 despite regulators having just ordered it to raise additional capital. As we reported then, the approval came two weeks after staff for Sen. Daniel Inouye, D-Hawaii, who had helped establish the bank and owned a large amount of the bank's stock, inquired about the bank's application for funds. Both regulators and Treasury denied that the inquiry affected their decision. Taxpayers ultimately lost $61 million from the investment.
 
Also notable among the failed investments is South Financial Group. The bank received a $347 million government investment in 2008 about a month after its former CEO, Mack Whittle, retired with a $18 million golden parachute. Taxpayers ultimately lost $200 million while the CEO kept his package. Contacted by ProPublica, Whittle said, "I founded [South Financial Group] in 1986 and take offense that anyone would imply that retirement benefits were not warranted." He added that the benefits had been negotiated long before he announced his retirement in the summer of 2008 and that he'd retired by the time the bank applied for TARP funds.
Of course, the government has already turned a profit on its bank investments overall, because the biggest bailouts — particularly Citigroup and Bank of America (each received $45 billion) — resulted in large profits. None of the banks remaining in TARP have net outstanding amounts over one billion dollars.
 
The Treasury wants to get rid of those remaining bank investments as soon as it can — even when that means selling stakes in apparently healthy banks for a discount, as ProPublica's Jesse Eisinger reported last month.
 
What defines a profit? So far, the Treasury has allowed many banks to exit TARP after receiving most, but not all, of the amount owed. But in cases where the Treasury received enough other revenue (e.g. through dividend payments) from the bank to result in a net gain, we label that investment as a profit. So far, that's been the case for 26 banks.
The final cost of the TARP, the Fannie, or the Freddie bailout isn't possible to know.
For the TARP, it depends on the biggest remaining investments: AIG and the remains of the auto bailout, GM and GMAC (now called Ally Financial). The net outstanding amount of those three companies together is about $61 billion. At this point, it seems likely that Treasury will ultimately recoup its bailout of AIG. The auto companies, on the other hand, seem likely to result in a loss approaching $20 billion, according to both Treasury Department and Congressional Budget Office estimates.
 
Another big factor is the TARP's housing programs, its mortgage modification program chief among them. Although Treasury set aside more than $40 billion for its various initiatives, less than $5 billion has been spent so far, a testament to the limited reach of the programs. Since those are subsidies, none of that money will be repaid, and any spending ups TARP's tab. Earlier this year, the CBO estimated that ultimately $16 billion would be spent.
 
Of course, all of these numbers benefit from being put in a broader context. The Obama administration argues that the TARP should be credited with blunting the force of the financial crisis and saving "more than one million American jobs." Critics like former TARP inspector general Neil Barofsky say the program may have stemmed the damage from the crisis, but it did so by largely preserving the broken too-big-to-fail system that caused the crisis. It's also worth mentioning that the Federal Reserve played an enormous role in supporting the biggest banks and allowing them to exit TARP.
 
The fate of the Fannie and Freddie bailouts is even harder to figure, although the Treasury recently announced that all of the companies' profits from now on will be handed over to Uncle Sam each quarter. Their tabs should decrease, but how quickly and for how long they'll be allowed to exist is unclear.
 
For now, our site provides a snapshot of the two bailouts as they actually stand. We've been at it since 2008, and we'll continue to update it frequently.
 
 

 

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SEBI settles charges against Sanghvi in front-running case

As per the settlement with SEBI, Sanjay Sanghvi paid Rs15 lakh and took a voluntary debarment from the market for 36 months, without admission or denial of guilt in the alleged front running in shares traded by HDFC Mutual Fund

 
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has disposed of a case against Sanjay Sanghvi, after he agreed to pay Rs15 lakh and take a 3-year voluntary debarment from the market to settle charges of fraudulent and unfair trade practices in the alleged front running in shares traded by HDFC Mutual Fund, reports PTI.
 
SEBI said that the settlement, which has been reached "without admission or denial of guilt", would apply to the charges levelled against Sanghvi in this matter alone.
 
SEBI had conducted an investigation into the alleged 'front running' activities that had taken place in a number of shares traded by HDFC Asset Management Company (AMC).
 
Front-running is an illegal market practice, wherein shares are traded based on prior information about the trading calls to be taken by institutional and other large investors.
 
On the basis of its preliminary findings, SEBI in June 2010 had prohibited some persons and entities from buying, selling or dealing in securities till further orders.
 
After completion of its probe, SEBI in February 2011 issued a show cause notice to Sanghvi, as he had allegedly violated the regulations about Prohibition of Fraudulent and Unfair Trade Practices in Securities Market.
 
While the proceedings were in progress, Sanghvi proposed a settlement in July 2011 under SEBI's consent order mechanism and thereafter revised the offer of settlement in September that year.
 
As per the revised terms of settlement, Sanghvi proposed to pay Rs15 lakh and undergo a voluntary debarment for a period of 36 months from buying, selling or dealing in the securities, directly or indirectly.
 
After deliberating over the consent proposal, SEBI's High Powered Advisory Committee (HPAC) recommended that the proceedings against Sanghvi may be settled on those terms.
 
These recommendations were accepted by SEBI and it communicated the same to Sanghvi in February this year.
 
Subsequently, SEBI passed the consent order, after Sanghvi paid Rs15 lakh and took a voluntary debarment from the market for a period of 36 months.
 
The regulator said that the consent order is without prejudice to its right "to initiate enforcement actions, including commencing or reopening of the proceedings pending against the applicant," if any representation made by him is subsequently discovered to be untrue, or the applicant breaches any of the consent terms or undertakings.
 
Separately, SEBI disposed of a case against Dhiraj Ghai, after he agreed to pay Rs1 lakh and take one-year voluntary debarment from securities market to settle alleged charges of fraudulent practices in trading of Alka Securities' shares.
 
"For the sole purpose of settling the matter on hand and without admission or denial of guilt on the part of the applicant (Ghai), the applicant has remitted a sum of Rs1 lakh," SEBI said in a consent order dated 3rd September.
 
Further, Ghai would voluntarily take debarment from dealing in securities market for one year from the date of this order, it added.
 
SEBI had observed a spurt in price and volume in the shares of Alka Securities during November 2008 and March 2009.
 
A probe had revealed that on many occasions, promoters of the company were involved in the off market transfers and these shares were subsequently traded at BSE.
 
The allegation was that Ghai had received 1,10,000 shares and sold these shares to the second-level entities and additional entities in off market during the investigation period.
 

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