July 29, 2009

Gov't earns 23% on Goldman bailout

Way back in September when the first TARP bailout was being considered, amidst the noise and debate, a few voices could be heard saying that, if structured properly, the government might not get fleeced when all was said and done.

That will probably end up being optimistic in the final overall analysis, but last week's news about Goldman Sachs repurchasing warrants from the U.S. Government as part of extricating itself from the bailout arrangement gives momentary credence to that earlier idea. In Goldman's case, they paid $1.1 billion to redeem the warrants, in addition to the $318 million in dividends they had already paid the government.

That means Goldman ended up paying the government $1.42 billion on the $10 billion in TARP assistance they received, or a 23% annualized return.

That's a pretty good return (although there are still plenty of questions surrounding the whole issue of whether they should have been bailed out, etc.).

Unfortunately, the government doesn't seem to be consistently replicating this type of success in other TARP repayments from other entities. So how the overall program will fare (in financial terms) remains to be seen. But at least in this one instance, we can see pretty clearly that the government didn't just "spend" the $700 billion in bailout money last fall. Chunks of it have been coming back a bit at a time, some with decent returns attached. Regardless of your feelings about the bailout overall, there's at least a little good news to be found in that news.