04/01/2011 06:21 pm ET Updated May 31, 2011

Treasury claims profit over banks bailout - I beg to differ

I read with interest this morning that the administration has declared a profit on its "successful" bailout of the financial institutions. The idea that the banks, et al., are saved is, at best, disingenuous; the "at worst" I'll leave to the imagination.

Most banks too large to fail and as small as the smallest remain "failed" if "mark to market" accounting is to be applied to their assets. Yes, the system is extremely fragile and is certainly not yet saved!

The statements by the Treasury of "profits" do not take into account all of the outstanding government guarantees of financial institution paper. More importantly, the Treasury has left unspoken perhaps the largest transfer of taxpayer money in history, from taxpayers to the banks.

Since the crisis began and continuing today, banks have been invited to borrow against securities (all kinds) at the Fed window at 0.25%. To finance this lending the Treasury has been selling U.S. Treasury bills, notes and bonds at an average cost of ten to twenty times the price charged by the Fed to banks for their borrowing. This transfer from taxpayers has been obfuscated, or, at least, left out of the calculations of government profit or loss. I am inclined to believe there is no profit to the taxpayer in the government's attempt to save the big banks.

Rest assured there remains great financial risk to the government P&L of the dubious investments in the financial institutions.

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