Business/Finance

How 'bout that multi-million percentage ROI?

“Psssst. Hey, you. Yeah, you, over there with the really fat checkbook.

“Wanna make some serious money real fast — and legal? Yeah, really — legally.

“All you gotta do is give me about $114 million. That’s all — and I’ll give you an ROI of 258,449 percent. Yep. You heard right — 258,449 percent. You’ll make $295.2 billion.

“That work for you?”

Apparently, yes. The Troubled Asset Relief Program, the now-fabled, poorly supervised “TARP,” has been quite a lucrative return on investment for companies getting the taxpayer-funded bailout bucks.

According to the Center for Responsive Politics:

The struggling companies whose freewheeling business practices have contributed to the country’s economic woes are getting a lucrative return on at least one of their investments. Beneficiaries of the $700 billion bailout package in the finance and automotive industries have spent a total of $114.2 million on lobbying in the past year and contributions toward the 2008 election. … The companies’ political activities have, in part, yielded them $295.2 billion from the federal government’s Troubled Asset Relief Program (TARP), an extraordinary return of 258,449 percent.

Says the center’s director, Sheila Krumholz:

Even in the best economic times, you won’t find an investment with a greater payoff than what these companies have been getting. Some of the companies and industries that have received payments may now consider their contributions and lobbying to be the smartest investments they’ve made in years.”

Now, who received the most in campaign contributions from these companies? Why, the politicians who are charged with oversight of TARP expenditures.

According to the center:

They include Sen. Chris Dodd of Connecticut, chairman of the Senate Committee on Banking, Housing and Urban Affairs (he received $854,200 from the companies in the 2008 election cycle, including money to his presidential campaign) and Sen. Max Baucus of Montana, chair of the Senate Finance Committee (he received $279,000). In total, members of the Senate Committee on Banking, Housing and Urban Affairs, Senate Finance Committee and House Financial Services Committee received $5.2 million from TARP recipients in the 2007-2008 election cycle.

President Obama’s campaign received at least $4.3 million in donations from employees at these companies.

The center provides a chart listing TARP recipients as of Feb. 2, campaign contributions for the 2007-2008 cycle, lobbying expenditures for 2008, the amount of TARP money received, and what the center terns “return on investment.” Some ROIs reach into millions of percent.

It’s interesting but infuriating reading, of course, and the analysis is somewhat flawed and unfair. Not all of the lobbying expenditures were directly targeted at obtaining TARP money. Many of the campaign contributions may actually have been given because of a corporate donor’s belief in a particular candidate (please, stop laughing.)

But that amount of money placed into politics by corporations that control global financial markets amounts to an enormous megaphone. Politicians can’t help but hear, let alone be deafened, by voices that loud.

The center’s analysis is instructive. It reminds us yet again of the corrosive role of Big Money in political decision making.

9 replies »

  1. And people wonder why I’ve come to think that declaring money = speech was one of the stupidest decisions that the Supreme Court made in its long history.

    Raise capital gains taxes and estate taxes radically – pull money OUT of the foundations that manipulate our government to their donor’s benefit and not the benefit of the people.

  2. Denny,

    Heard this discussed on NPR’s “To the Point” yesterday. What Paulsen did when the Congressional Oversight Committee asked him directly how money was being traded for assets was tell them that the aid was being offered AT PAR – for every $100 that OUR government gave the banks and lending institutions, they were supposedly receiving $100 in assets. When the CSO unpacked the assets (those bundled packages with toxic mortgages and things mixed with good assets), they found that what Paulsen and co. were doing was paying out $100 for $65 in assets.

    Whether Paulsen acted to shore up banks and forestall a complete meltdown or panic is arguable – but he lied to the COS – and his successor Geithner is complicit in allowing Lehman Bros. to fail – and precipitating this crisis. He’s also willing, it seems, to continue Paulsen’s payment methods.

    The rich using their power and access to enrich themselves further at we the people’s expense – how 21st century American….

  3. TARP and government oversight are mutally exclusive.

    Jim’s right about the “almost” par price for the baskets which would make the rate of return much, much less than 258,449%. What’s of note is that so much of that paper is so toxic as to render it worthless….think Chinese 1948 railway bonds worthless.

    Bloomberg has good material on the valuation of the assets

    Jeff

  4. Um, except, aren’t we “buying” those “worthless papers”? We’re paying $100 for $65 worth of _bad paper_. and the banks are no longer holding that paper, WE DO. Right?

    I thought the entire point was to “move the bad paper to the public’s hands” so the banks didn’t have to keep them on the books any more..? Surely we’re not just loaning them cash so they can say “look at the stack of money that sits behind those bad debts”.. And if we are, when they get to NOT pay us back based on many of the loopholes that were put in the bills, wasn’t that free money that was used to back bad paper (that they willingly took, don’t forget.. perhaps _eagerly_ took), then writing off that paper, basically giving them that money anyway?

    I guess I’m a bit confused as to the details of what’s being exchanged for what, and who actually sits on the hot seat when trillions in bad debts is just “wiped away”.. I’m pretty sure “we, the people” are still going to owe that debt, but the crooks that caused the mess will still have all of their (our) money.

  5. ” I’m pretty sure “we, the people” are still going to owe that debt, but the crooks that caused the mess will still have all of their (our) money.”

    The bankers have their money, and you still have your deposits in the form of CD’s, Checking accounts, Savings accounts, etc. Unless the individual exceeds the limit, the deposits are 100% protected.

  6. “The bankers have their money, and you still have your deposits in the form of CD’s, Checking accounts, Savings accounts, etc.”

    Yes, and now we also have an extra trillion dollars in debt that we all have to pay back. I have to pay for the poor decisions the bankers made, but the bankers keep their jobs and keep making [insane amounts of] money and keep their business. They are even giving themselves bonuses with the money we’re giving them. Good gig for them, right?

    I have the money I put in the bank still available.. the bank still “looks good” on paper (despite the global mess they caused).. and my children’s future is fucked by a debt that will be near impossible to pay off in their lifetimes, all so the bankers can keep their books “looking good” so they can keep siphoning off billions a year for their children (who won’t do a hard day’s work in their entire lives, and still shit in gold plated toilets and have better emergency response times than the guy that makes the tires for the emergency response vehicles).

    I think the point was way far away from “you’ll still have your deposits”. But keep trying to distract and distort and deflect. I’ll keep bringing it back to the topic at hand.

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