Will Treasury Make Money On Bank Rescues? The Treasury and Federal Reserve bailed out some of the major banks last year. Now a portion of that money is coming back, and with it some hefty profits for the government. Is the rescue of the banking system turning out to be a good investment for taxpayers? David Wessel of The Wall Street Journal talks with Renee Montagne about whether the Treasury and Fed are turning a profit.
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Will Treasury Make Money On Bank Rescues?

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Will Treasury Make Money On Bank Rescues?

Will Treasury Make Money On Bank Rescues?

Will Treasury Make Money On Bank Rescues?

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The Treasury and Federal Reserve bailed out some of the major banks last year. Now a portion of that money is coming back, and with it some hefty profits for the government. Is the rescue of the banking system turning out to be a good investment for taxpayers? David Wessel of The Wall Street Journal talks with Renee Montagne about whether the Treasury and Fed are turning a profit.

RENEE MONTAGNE, Host:

When the Treasury began pouring money into troubled banks last year, many taxpayers were furious, fearing billions were going down the drain. But now some of that bailout money is coming back. To find out whether taxpayers are reaping good returns from the financial rescue, we turned to David Wessel, he's economics editor of the Wall Street Journal. Good morning.

DAVID WESSEL: Good morning, Renee.

MONTAGNE: Let's start with $700 billion - that was the bailout, that money that ended up as infusions into banks. Is that turning out to have been a profitable investment?

WESSEL: But there are a lot of weak banks that haven't paid back the money and there are a lot of guarantees that the government made that probably will have to - that people won't pay back the money. So, we're getting the good news first and we'll get the bad news later.

MONTAGNE: Well, if taxpayers do turn a profit, even in some cases, does that mean the bailout is successful or at least partially successful?

WESSEL: It's also important, I think, to remember that most of the banks got money from the government, from the taxpayers, at terms they could never have gotten it on the private market. So, in that sense, there was a subsidy to these companies even if we make some money on it.

MONTAGNE: Well, still, do these recent reports of profits and then hearing about banks actually paying back their bailout fund, does it make life easier for Treasury Secretary Tim Geithner and also maybe Fed Chairman Ben Bernanke?

WESSEL: But fundamentally, I think people want a strong economy. And if the economy turns out to be strong and healthy in a few months, the bailout will look to have been a success. And if the economy is languishing, if unemployment remains at 10 percent for another year and a half, then they're going to judge the bailout to have been a disaster.

MONTAGNE: And either of those two futures are possible?

WESSEL: Absolutely. Although, the recent signs are that the economy here and abroad seems to be coming back somewhat better than a lot of people expected, including me.

MONTAGNE: David, thanks very much.

WESSEL: You're welcome.

MONTAGNE: David Wessel is the economics editor of the Wall Street Journal.

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