The federal government's investments in banks and automotive companies have lost more than $100 billion in value, according to analysis by an economic think tank.
The Ethisphere Institute, using a stock index that tracks both private and publicly traded companies that have received money under the Troubled Asset Relief Program, said that the Treasury Department's initial investment of $306.1 billion was now worth only $196.5 billion.
These losses, which work out to $968 for each taxpaying household, have not actually been realized. They reflect only the diminished value of the stock the government received in exchange for bailing out the banks, the group said.
Congress and the Treasury never expected instant profits on the program. The thinking was that the government would reap any returns slowly, through the collection of dividend payments and the exercise of warrants to buy additional shares of the companies getting TARP funds.
And although investors have charged back into the stock market in recent weeks, the value of the Treasury's TARP portfolio has not improved.
"Recent rallies in the stock market have not translated into an increase in the Ethisphere TARP Index," said Stefan Linssen, managing editor of Ethisphere Magazine and one of the lead research analysts working on the index.
The worst performers include American International Group Inc., which has lost $30 billion in value for taxpayers since it was bailed out starting in September, and Citigroup Inc., which is down $24.4 billion since November.
Although Treasury's portfolio has suffered overall, a few stocks have seen some significant gains. The value of Treasury's holdings in Morgan Stanley has improved by $3.2 billion, and its stock in Goldman Sachs has gained $577.6 million, according to the analysis.
In creating its index, the Ethisphere Institute acknowledged that it was difficult to calculate the value of the preferred shares received by Treasury due to a lack of disclosure of the original terms of investment, including details about the liquidation preference and conversion rate.
To calculate the value of the warrants that Treasury received to buy additional common stock in publicly traded companies, the institute used the mean of the 20-day trailing average for each company's stock price.
To calculate the movement of Treasury's investment in private companies, it tracked the movement of the NASDAQ Bank Index and the S&P Banking Index.
Ethisphere also wrote down the value of the government's preferred shares in automotive companies by 90 percent.
BailoutSleuth is in the process of creating its own regularly updated tally of the value of the shares and warrants that Treasury received for its TARP money. It will be posted as a link on the site soon.
The Ethisphere Institute, using a stock index that tracks both private and publicly traded companies that have received money under the Troubled Asset Relief Program, said that the Treasury Department's initial investment of $306.1 billion was now worth only $196.5 billion.
These losses, which work out to $968 for each taxpaying household, have not actually been realized. They reflect only the diminished value of the stock the government received in exchange for bailing out the banks, the group said.
Congress and the Treasury never expected instant profits on the program. The thinking was that the government would reap any returns slowly, through the collection of dividend payments and the exercise of warrants to buy additional shares of the companies getting TARP funds.
And although investors have charged back into the stock market in recent weeks, the value of the Treasury's TARP portfolio has not improved.
"Recent rallies in the stock market have not translated into an increase in the Ethisphere TARP Index," said Stefan Linssen, managing editor of Ethisphere Magazine and one of the lead research analysts working on the index.
The worst performers include American International Group Inc., which has lost $30 billion in value for taxpayers since it was bailed out starting in September, and Citigroup Inc., which is down $24.4 billion since November.
Although Treasury's portfolio has suffered overall, a few stocks have seen some significant gains. The value of Treasury's holdings in Morgan Stanley has improved by $3.2 billion, and its stock in Goldman Sachs has gained $577.6 million, according to the analysis.
In creating its index, the Ethisphere Institute acknowledged that it was difficult to calculate the value of the preferred shares received by Treasury due to a lack of disclosure of the original terms of investment, including details about the liquidation preference and conversion rate.
To calculate the value of the warrants that Treasury received to buy additional common stock in publicly traded companies, the institute used the mean of the 20-day trailing average for each company's stock price.
To calculate the movement of Treasury's investment in private companies, it tracked the movement of the NASDAQ Bank Index and the S&P Banking Index.
Ethisphere also wrote down the value of the government's preferred shares in automotive companies by 90 percent.
BailoutSleuth is in the process of creating its own regularly updated tally of the value of the shares and warrants that Treasury received for its TARP money. It will be posted as a link on the site soon.
published April 7, 2009, 0 Comments
Leave a comment