The Bailouts Of 2007 - 2009

The authors conclude:

It is fair to say that no one involved in the decision to rescue and restructure General Motors and Chrysler ever wanted to be in the position of bailing out failed companies or having the government own a majority stake in a major private company. We are both thrilled and relieved with the result: the automakers got back on their feet, which helped the recovery of the US economy. Indeed, the auto industry’s outsized contribution to the economic recovery has been one of the unexpected consequences of the government intervention.

The symposium also features an analysis of assistance to financial institutions under the Troubled Asset Relief Program (TARP) by Professord Charles Calomiris and Urooj Khan, both at Columbia. Calomiris is a prominent conservative economist, so one might have expected this review to be somewhat critical of the intervention. But the authors acknowledge the favorable bottom line:

For the most part, the [TARP] transactions with the banks, the focus of this paper, yielded a net cash flow gain. The net cash flow costs were largely from the assistance provided to AIG, the automotive industry, and the programs aimed at avoiding home mortgage foreclosures. The net cash flow gain estimated for the Cash Purchase Program was $16 billion with only $2 billion of preferred stock remaining outstanding. The CBO estimated a net cost of $15 billion to the Treasury for the assistance provided to AIG under the Systemically Significant Failing Institutions program. All of the supplementary support provided to Citigroup and Bank of America through the Targeted Investment Program had been paid back and resulted in a net gain of roughly $4 billion dollars to the federal government. Finally, the loss-sharing agreement with Citigroup through the Asset Guarantee Program yielded a net gain of $3.9 billion.

The authors review evidence for the benefits of these programs and find it difficult to make a definitive statement:

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