The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times.
This is good news, but I'm not sure it's worth blaring all over the front page just yet. Here's the fourth paragraph of the story:
The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.
The money that's being paid back first comes from the very strongest banks — mostly the ones that really didn't need capital injections in the first place. They were always the ones who were likely to cash out first, cash out completely, and therefore provide the government with its highest rate of return. In other words, looking at the results of TARP so far is as distorted as if you tried to get a sense of how an election was going by polling only your own guy's strongest precincts. You'd just be kidding yourself.
TARP won't end up costing $700 billion. But these early paybacks account for only about 10% of the total and really don't provide a very good sense of how the program as a whole is likely to turn out. It's more like an absolute upper bound.