5 ms·

They paid back $11.4 billion though.

sosuke 10y ago
That's an excellent loan isn't it. A home loan usually ends up in twice the price being paid back over the length of the loan.
- praxulus 10y ago
  A home loan is also paid back over 15 to 30 years. The bailout loans were paid back in under 5 years. Are you familiar with the "time value of money"?
  - sosuke 10y ago
    You're right, at 5 years only a billion dollars of interest would have accrued with 4% interest.
- dangrossman 10y ago
  A home loan would've generated 3-4% in interest a year. The US government made over 14% in less than a year on this loan. That would make it terrible, not excellent, for the borrower -- more akin to a high interest credit card than a mortgage. Mortgages involve paying so much back because you have interest compounding on a large balance for 15-30 years.
  - IkmoIkmo 10y ago
    Actually this wasn't a terrible rate for GS, it was a great rate. And it can't simply be compared to a mortgage.
- deelowe 10y ago
  Home loans are for 10,15, or 30 years unless you're comparing ARMs. In any case, there's no comparison here. The government made 15% on a 5 year loan. That's terrible for GS and great for the government. A better comparison would be an auto loan which has a comparable time value. I don't know of any auto loan which comes close to that (15% after 5 years).
jsprogrammer 10y ago
Not hard when the Fed will let you flip paper for profit.
IkmoIkmo 10y ago
Which is ridiculously cheap. Remember that today the cost of equity for GS is > 14%, that's the 2016 figure. In the financial crisis, that rate probably skyrocketed to a much higher number, as did the cost of debt during the credit crunch when nobody was looking to lend because default risk was going through the roof and everyone needed to pad the books with cash and deleverage. So the government stepping in with debt at this rate can be considered to have been very cheap. And that's why they took it. If they could've gotten a better market rate they would've, that should tell you enough about how good that deal was. Did the government make a bunch of money? Absolutely. And so would anyone investing in highly risky assets in a highly risky time when the bet pays off, it's just called compensation for risk.

That's an excellent loan isn't it. A home loan usually ends up in twice the price being paid back over the length of the loan.

praxulus 10y ago
A home loan is also paid back over 15 to 30 years. The bailout loans were paid back in under 5 years. Are you familiar with the "time value of money"?
- sosuke 10y ago
  You're right, at 5 years only a billion dollars of interest would have accrued with 4% interest.
dangrossman 10y ago
A home loan would've generated 3-4% in interest a year. The US government made over 14% in less than a year on this loan. That would make it terrible, not excellent, for the borrower -- more akin to a high interest credit card than a mortgage. Mortgages involve paying so much back because you have interest compounding on a large balance for 15-30 years.
- IkmoIkmo 10y ago
  Actually this wasn't a terrible rate for GS, it was a great rate. And it can't simply be compared to a mortgage.
deelowe 10y ago
Home loans are for 10,15, or 30 years unless you're comparing ARMs. In any case, there's no comparison here. The government made 15% on a 5 year loan. That's terrible for GS and great for the government. A better comparison would be an auto loan which has a comparable time value. I don't know of any auto loan which comes close to that (15% after 5 years).

jsprogrammer 10y ago

Not hard when the Fed will let you flip paper for profit.

IkmoIkmo 10y ago

Which is ridiculously cheap. Remember that today the cost of equity for GS is > 14%, that's the 2016 figure. In the financial crisis, that rate probably skyrocketed to a much higher number, as did the cost of debt during the credit crunch when nobody was looking to lend because default risk was going through the roof and everyone needed to pad the books with cash and deleverage. So the government stepping in with debt at this rate can be considered to have been very cheap. And that's why they took it. If they could've gotten a better market rate they would've, that should tell you enough about how good that deal was. Did the government make a bunch of money? Absolutely. And so would anyone investing in highly risky assets in a highly risky time when the bet pays off, it's just called compensation for risk.