Banks, insurance and auto industry giants all definitely have one thing in common, they all received generous bailout funds to make sure their companies did not go bankrupt. Surprisingly, most of the companies are paying back the funds sooner than expected. The economy is on the right track and hopefully this means we are getting ourselves out of this “recession”.
Government officials were not expecting for many of the companies to become independent within a matter of a couple years. Even AIG is expected to free its ties from government control and is expected to raise $51 billion through asset sales. At the current standing the government owns about 80% stakes which accounts for $48 billion is preferred shares, soon will become less. The government is considering converting its stake into common shares which will later be sold to investors, something similar to what they are trying to do with Citigroup.
News is that Treasury plans to sell about $32 billion of its stake in Citigroup Inc. General Motors Corp. has taken initiative to paying back the $6.7 billion they owe. Both companies, as well as AIG, could be let go from government control within less than a year.
There are taxes, interest payments and other rescue-related income imposed of the funds provided by the government that the companies must pay in addition to the funds they received. About $13.7 billion has already been collected. Fannie Mae and Freddie Mac are currently paying up to 5% a year on $1.5 trillion. An estimated cost of $370 billion is expected for them by 2020. Another $4 billion is generated through shares bought in TARP recipients.
About $169 billion has been paid back out of the $245 billion that was used for funding. Officials estimated about a profit of $8 billion.
Although this information about the bailout funds is great news for the economy it does not mean that our economy will bounce back within a year. With all the debt the U.S. is in we will need much more time for a complete recovery.
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