“Guess what, American taxpayer: More than four years after the financial crisis started, you are still on the hook for a nearly $15 billion investment in a subprime mortgage lender.
That’s just one of a litany of troubling facts in a new report by Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, which pumped more than $600 billion into failing banks and other companies during the crisis. The report details the many billions of taxpayer dollars still sunk into hundreds of struggling banks, some of which are still failing, and the risks still festering that could create a future crisis.
The report is a striking reminder that, even as the stock market comes close to cruising to record highs, led by skyrocketing bank stocks, the crisis still haunts us.
In fact, the bailout could arguably have made a future crisis more likely, by encouraging big banks to take on even more risks, in the widespread belief that they can always turn to the government for more cash in the event they crash the Hindenburg, again.
“The people taking those risks are insulated from the consequences — that’s moral hazard,” Romero said in a telephone interview. “It continues to exist, and it must be dealt with.”
The government is still mopping up the mess from the last crisis, as Romero’s report makes clear. Its portfolio of pain includes a 74 percent stake in Ally Financial, formerly known as GMAC, which was rescued repeatedly during and after the crisis, with little or no plan for ending the rescue, according to Romero.
Ally still owes the government $14.6 billion and might ultimately cost the Treasury Department $5.5 billion in losses, according to the White House Office of Management and Budget — part of a total long-term TARP cost that could exceed $60 billion….”
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