The Bailouts Of 2007 - 2009

The latest issue of the Journal of Economic Perspectives had a very interesting symposium on the costs and benefits of the various bailouts implemented during the Great Recession.

The first article in the issue is by University of Chicago Professor Austan Goolsbee and Princeton Professor Alan Krueger. Goolsbee served on the President’s Council of Economic Advisers from March 2009 to August 2011, and Krueger spent much of 2009 to 2013 in the Treasury Department and CEA, so one might not expect them to be big critics of the policies. Their review is quite candid in communicating the misgivings that many of those in government had about the measures. Here’s Goolsbee and Krueger’s summary of the bottom line:

The US Treasury recovered a total of $39.7 billion from its investment of $51.0 billion in GM. By the end of 2014, Treasury sold its remaining stake in Ally Financial, recovering $19.6 billion from the original $17.2 billion investment in Ally, for a $2.4 billion gain for taxpayers. In May 2011, Chrysler repaid its outstanding loans from the Troubled Asset Relief Program (TARP) six years ahead of schedule. Chrysler returned $11.2 billion of the $12.5 billion it received through principal repayments, interest, and cancelled commitments, and the Treasury fully exited its connection with Chrysler.

And what did any of the rest of us gain from this?

Since bottoming at 623,300 jobs at the trough of the recession in June 2009, employment in the motor vehicles and parts manufacturing industry has increased by 256,000 jobs (as of July 2014). This is a stark contrast from the previous recovery, when jobs in the industry steadily declined. The increase in the number of jobs in motor vehicles and parts manufacturing accounted for nearly 60 percent of the total rise in manufacturing jobs in the recovery’s first five years. In addition, some 225,000 jobs have been added at motor vehicle and parts dealers. Counting both manufacturers and dealers, auto-related jobs accounted for 6 percent of the total 8.1 million jobs that were added, on net, in the first five years of the recovery—triple the sector’s 2 percent share of total employment.

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