Reports: $4 billion profit from bailout banks – but commercial real estate may create new crisis

August 31, 2009

(ChattahBox) — The Treasury Department has begun seeing profits from the roughly $240 billion in bailout aid, only a year after the federal rescue of the nation’s biggest banks. According to calculations compiled by The New York Times, the Federal Reserve has earned about $4 billion, from fees and interest profits received from eight of the biggest banks that have fully repaid their obligations to the government, which comes to  the equivalent of about 15 percent return annually.  Separately, the Financial Times reported the Federal Reserve has made a $14 billion profit on loan programs designed to stabilize the financial system.

The Times cited government profits of $1.4 billion from Goldman Sachs, $1.3 billion from Morgan Stanley and $414 million from American Express. It also listed five other banks: Northern Trust, Bank of New York Mellon, State Street, U.S. Bancorp and BB&T — that each returned profits between $100 million and $334 million. The government has also collected about $35 million in profits from 14 smaller banks.

The Times report notes though that the government still faces potentially huge long-term losses though from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler.

Meanwhile The Wall Street Journal is reporting that Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from becoming the next potential mortgage crisis after years of bad underwriting. With $700 billion in commercial-mortgage-backed security loans outstanding, and the delinquency rate in July six times the rate at the same time last year, property owners will have a hard time refinancing loans that have been already been bundled. By the end of 2012, $153 billion in loans bundled into CMBS will be due, and close to $100 billion will have difficulty refinancing.


Comments

6 Responses to “Reports: $4 billion profit from bailout banks – but commercial real estate may create new crisis”

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  4. MasterPlan Capital LLC on August 31st, 2009 12:51 pm

    It is important that we prevent lawmakers from using this newfound “profit” to fund a new bailout. Barney Frank of MA has proposed “TARP for Main Street” to help prevent unemployed homeowners from foreclosure. The profit should be used to offset debt and mitigate future losses to the Treasury and Fed that are surely on the way.

  5. Devils Thumb on August 31st, 2009 1:17 pm

    It’s good news that the federal reserve has made $4 billion from fees and interests profits, and $14 billion profits from loan programs. But these amounts seem puny compared to the $700 billion outstanding in commercial-mortgage-backed security loans.

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