Try starting your work day like this (looks like he did it on purpose, doesn’t it?)

Courtesy: Failblog

Stories I’m reading this Wednesday:

• On again, off again Chrysler / Fiat deal is on again
• Michigan workers try to reinvent themselves
• Stocks set to rise on positive economic data out of China
• Home Depot also helps the market by raising its forecast
• Opinion: Why it’s in China’s interest to help Tim Geithner
• Inverse indicator?   BusinessWeek proclaims housing slump “over”
• Big hedge fund makes big commercial real estate investment
• Saudi Arabia starts pumping its giant Khurais oilfield
• You just can’t win with the sleep issue

The government just announced it is “allowing” 10 banks to repay $68 billion in TARP funds.   It was also noted that the banks involved have paid approximately $4.5 billion in dividends on the preferred shares to date.  This will no doubt be spun in Washington as “the taxpayer is being repaid” to the tune of $72.5 billion bucks and we should all be happy.

In 2007 there were about 139 million tax returns filed.   Simple math tells us that the TARP repayment and dividend payments comes to about $521 bucks per tax return filed.

Good news!

Or not.

What are the odds that the taxpayer - who fronted the TARP money through increased government borrowing - is gonna see one dime of that cash?    About the same as the Washington Nationals winning the World Series this year.

The top story in the Wall Street Journal tonight is that the Treasury plans to extend TARP funding to certain life insurance companies whose capital has been hit hard.

From the Journal:

The Treasury Department plans to extend the Troubled Asset Relief Program to certain eligible life insurers, according to people familiar with the matter. Several life insurers have been burdened lately by capital constraints amid ailing markets.

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, these people said.

This shouldn’t be something new to viewers of the program.   I have spoken about this before on the program, and even highlighted it in a speech I gave at a conference in New York back in November.

You can watch the speech here (insurance comment comes 1:20 into speech)

Despite being widely hated, ridiculed and otherwise smacked down by the public, the $700 billion dollar TARP program may turn out to be the best investment the taxpayer made all year.

The folks over at Bianco Research (run by Jim Bianco, one of the smartest and most respected bond analysts in America) published a note today called “Tracking the Trust Cost of the TARP.”  This is their conclusion:

The Treasury infused $247.26 billion into 184 companies over the span of the credit crisis. In exchange for these bailouts, the Treasury received securities that are currently valued at $255.10 billion.  This means the TARP bailouts have actually turned a profit for U.S. taxpayers as of this writing. After factoring in the current value of the securities the Treasury received in exchange for its bailout money, the Treasury has turned a net profit of $7.84 billion for a 3.17% return on investment over the period.

There’s a phrase we don’t hear much these days, “turned a profit.”

The primary reason, Bianco argues, has to do with the nature of the preferred share investments the government made:

Every recipient of TARP funds, AIG and Citigroup excepted, had to agree to the same terms. In return for a capital infusion, the Treasury would receive 100% of the infusion value in the form of preferred shares of that company. This preferred pays a 5% dividend in the first three years and a 9% dividend after that. In addition, each company also would have to give the Treasury warrants equal to 15% of the infusion value.

This follows a story earlier this week that government money-receiving insurance firm AIG sold some mortgage related assets to the government.   From the story:

In the deal announced Monday, the Federal Reserve Bank of New York made a senior loan to Maiden Lane II to buy the residential mortgage-backed securities for an initial purchase price of $19.8 billion. The six-year loan is secured by the $39.3 billion face amount of the securities and bears interest at one-month LIBOR plus 1%.

Notice the sale price to the government is about 50% of the face value of the securities.   Granted, that face value may be less today than it was when the loans were made, but it is highly unlikely the value of those assets has dropped by half.   Additionally the government loaned the money to AIG and is making a few percentage points in interest.   If the value of these assets rises, the government will be holding them on the books at more than it paid.      Buying low, hopefully selling high.

We are still in the early innings of the TARP game, but the very early score indicates that the much-maligned $700 billion dollar rescue program may actually give a little back for the use of your money and, at the minimum, we get to hear a bit of all-too-rare good news.