The Obama administration seems to have exaggerated the benefits of its bank bailouts.
Treasury Secretary Tim Geithner recently said the government has made a modest profit on its investments in banks through the Troubled Asset Relief Program (TARP), Fortune magazine explains.
"We've already earned about $6 billion for the taxpayer on those investments," Geithner told ABC's "This Week."
But according to data published last month by TARP’s special inspector general Neil Barofsky, the Treasury received $6.85 billion in bank dividend and interest payments since the program began last fall through June.
That’s great, but dividends shouldn’t be confused with profits, Fortune points out.
"Dividends are definitely income, but they're not necessarily profit," Alex Pollock, a resident fellow at the American Enterprise Institute, tells Fortune.
Others, such as Government Accountability Office official Gary Engel, echo that view.
Pollock says it's impossible to determine TARP’s profitability without a thorough accounting of its costs, including interest expense and overhead.
What the Treasury should do is to treat TARP as if it were an independent company, with its own independently-audited financial statements and balance sheet, he says.
While TARP may not be earning profit yet, it apparently is uncovering some bank corruption.
TARP and FBI agents raided Florida bank Colonial BancGroup and mortgage lender Taylor, Bean & Whitaker after the collapse of a proposed partnership that could have brought them more than $500 million in TARP money, The New York Times reports.
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