1115.org

The TARP Congressional Oversight Panel has released a report which puts a number for the first time on how many billions of our money Hank Paulson managed to lose right up front when he pumped capital into mismanaged banks.

By way of background, recall this Bloomberg article from four weeks ago:

Henry Paulson may be the most powerful manager of money in the world and he still couldn’t do for taxpayers with the $700 billion bailout of American banks what Warren Buffett did for his shareholders in investing in Goldman Sachs Group Inc.

The Treasury secretary has made 174 purchases of banks’ preferred shares that include certificates to buy stock at a later date. He invested $10 billion in Goldman Sachs in October, twice as much as Buffett did the month before, yet gained warrants worth one-fourth as much as the billionaire, according to data compiled by Bloomberg. The Goldman Sachs terms were repeated in most of the other bank bailouts.
[...]
The transactions are “just egregious,” said (Simon Johnson, former chief economist for the International Monetary Fund and a fellow at the Peterson Institute for International Economics in Washington). “You want to do it the way Warren does it.”
[...]
“If Paulson was still an employee of Goldman Sachs and he’d done this deal, he would have been fired,” (said Joseph Stiglitz, a Columbia University professor who won the Nobel Prize for Economics in 2001).
[...]
Buffett received 43.5 million Goldman Sachs warrants valued at $82.18 apiece on the date of the transaction, or $3.6 billion, Bloomberg analytics show. Paulson, who served as the New York-based bank’s chief executive officer until 2006, injected twice as much taxpayer money into Goldman Sachs a month later and got 12.2 million warrants worth $72.33 each, or $882 million.

Now here’s the Oversight Panel’s estimate of how much we lost right off the bat:

The Treasury, when it was headed by Secretary Henry Paulson, received bank assets worth about $176 billion in exchange for capital purchases of $254 billion under the Troubled Asset Relief Program, the Congressional Oversight Panel said in a report today.

“The loss estimate is conservative,” said Representative Alan Grayson, a Florida Democrat on the House Financial Services Committee.

That’s a $78 billion boondoggle, effortlessly making it clear what a rank amateur Bernie Madoff really is. And Paulson stole from a lot more people than Madoff, too. A hell of a lot more money, stolen from a hell of a lot more people. Plus, he gets away scotfree.

Perhaps one day the name Paulson will be even more infamous than the name Ponzi?

*** Update, 7:10 a.m. ***

Propublica has a breakdown of the handouts by recipient.

Citigroup received (the first time around) $25 billion for securities that are estimated to have been worth only $15.5 billion at the time of the transaction. That’s a handout of 38%.

The second time around Citigroup presumably had a better feel for how much highway robbery was permitted, if not encouraged. This time they persuaded us to cough up $20 billion for $10 billion worth of securities.

AIG is the one that really cleaned up though, receiving $40 billion for securities that are estimated to have been worth only $14.8 billion at the time. That’s a handout of 63%.

Honorable mentions where they are due:
— JP Morgan Chase got away with $4.4 billion of our money.
— Morgan Stanley came close with $4.2 billion.
— Goldman Sachs walked away with a 25% handout, PNC with 27%.