The U.S. government revised its estimated cost of the $700 billion bank bailout package, giving the Obama administration a $200 billion pre-Christmas present.
The Treasury Department expects companies will return $328 billion of the $370 it doled out in loans through the Troubled Asset Relief Program, The New York Times reported Sunday. That estimate means the government will get stuck with a $42 billion bill for the program that was used to prop up banks, car companies General Motors Co. and Chrysler Group, and insurer American International Group.
The Treasury said banks have already returned $70 billion and estimated $175 billion could be returned by the end of 2010. One substantial repayment -- $45 billion from Bank of America -- could be repaid by the end of the month, The Washington Post reported.
A Treasury report expected Monday will not show TARP has been all patience and profits. To date, TARP has lost about $60 billion, and a downturn could provide more losses. With Citigroup and Bank of America as of this writing as the only large banks left in arrears to the government, regional banks are still holding onto TARP funds and many of those are expecting to suffer losses through a rising bubble in commercial real estate.
The $42 TARP shortfall includes losses to Chrysler, GM and AIG, but also includes about $19 billion in profits -- interest and dividend payments and the resale of collateral, the Times said.
While finding $200 billion prior to mid-term elections could soften public anger over massive programs that supported banks while lending and jobs evaporated, Treasury Secretary Timothy Geithner may still elect to keep the TARP program open for another year.
It is Geithner's call. The bill was written so that Treasury needs only to notify Congress that the program should continue in order to do so. Last week, Geithner told a Senate committee, "nothing would make me happier than to end this as quickly as possible … (but) we're not quite there yet."
The U.S. government was not the only one to pump investments into the banking system when the financial crisis was unfolding. Sovereign wealth funds bought huge swaths of bank shares when the chips -- and the prices -- were down with some of them sitting pretty now that banks have rebounded.
On Sunday, the investment arm of the Kuwaiti government said it earned $1.1 billion profits from the $3 billion in Citigroup shares bought in January 2008 -- a quick, 37 percent return on an annualized basis.
Singapore did slightly better with a return of $1.6 billion from its investment in Citigroup. The Abu Dhabi government, meanwhile, through the International Petroleum Investment Co., realized a $100 percent return on a $3.2 billion investment in Barclay's, the Times said.
Not all the big investors have done well, The China Investment Corp. did poorly with a $3 billion bet on the Blackstone Group while Singapore's Temasek Holdings lost money on Barclays and Merrill Lynch.
In market movement Monday, the Nikkei 225 in Japan rose 1.45 percent, while the Shanghai composite index added 0.45 percent. The Hang Seng index in Hong Kong lost 0.77 percent, while the Sensex in India lose 0.69 percent.
In Australia, the S&P/ASX 200 lost 0.55 percent.
In midday trading in Europe, the FTSE 100 in Britain lost 0.6 percent, while the DAX 30 in Germany lost 0.61 percent. The CAC 40 in France dropped 0.46 percent. The pan-European DJ Stoxx 50 lost 0.87 percent.
