As of the end of August, the Treasury Department saw profits from the roughly $240 billion in bailout aid. According to calculations compiled byThe 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. 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 NY 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 from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and General Motors and Chrysler.
Currently, there is approximately $3.5 trillion or more of outstanding debt associated with U.S. commercial real estate. The delinquency rate on commercial property loans pooled into investments is about $750 billion. This rate is nearly triple from where it was at the end of last year. The increasing real estate delinquency rate combined with stagnate growth and high unemployment questions whether or not some form of additional bailout stimulus is necessary. Profit is a good thing and perhaps the main purpose of any business transaction, but do we really need further bailouts?
