March 2011

Was Bailout Not as Costly as Previously Estimated?

Almost three years after a series of government bailouts began, what many feared would be a deep black hole for taxpayer money isn’t looking nearly so dark. The brighter picture is highlighted by the outlook for the bailouts’ centerpiece—the $700 billion Troubled Asset Relief Program. “It’s turning out to cost a lot less than what we all thought at the beginning,” said Ted Kaufman, a former U.S. senator from Delaware who heads the congressionally appointed panel overseeing TARP.

In mid-2009, the program was projected to lose as much as $341 billion. That’s been reduced to $25 billion—partly because of the controversial decision to pump much of the TARP money into banks instead of launching a large-scale purchase of securities backed by toxic subprime mortgages.

There is now broad agreement that the bailouts worked, stabilizing the financial system and preventing an even deeper crisis.

Still, many people are worried about the long-term effects of the government actions. They said that in demonstrating a belief that some companies were too big to fail, the government set a dangerous precedent, opening the door to future crises.

Those critics also said that hundreds of billions of dollars in bailout money from TARP, the Treasury and the Federal Reserve will not come back, mainly because of the rising tab for seized housing finance giants Fannie Mae and Freddie Mac, which combined have consumed $150 billion in taxpayer money so far. “We’re not going to recoup those losses,” said Rep. Patrick McHenry, R-N.C., chairman of the House Oversight and Government Reform subcommittee monitoring the bailouts.

Fannie and Freddie, which the Obama administration recently proposed to shut down, are the main reason most recent estimates of losses for all the various bailout efforts range from $238 billion to $380 billion. But Treasury officials think those estimates might be too high. They said the cost of all the financial interventions is likely to be less than $140 billion, or 1% of the United States’ $14-trillion annual economic output.

That’s less expensive than the federal losses from the savings and loan crisis in the late 1980s and early 1990s, which cost an estimated 2.4% of the nation’s annual economic output at the time, an International Monetary Fund study found.

The decision by former Treasury Secretary Henry M. Paulson in fall 2008 to shift TARP from its original mission kept the government from taking ownership of hundreds of billions of dollars in securities backed by bad mortgages. “It was clear in the fall that you didn’t have time for that because the crisis was too great and moving too quickly,” Timothy Massad, TARP’s acting manager said. If money had not been pumped directly into the largest banks, he said, “I think you then would have been presiding over a collapse of the financial system and potentially a second Great Depression.”

A study last year by Mark Zandi, chief economist at Moody’s Analytics, and Alan Blinder, a Princeton economist and former Fed governor, concluded that TARP “has been a substantial success.”

A stronger housing recovery could mean Fannie and Freddie would need only about $71 billion more, the report said. Zandi said it’s possible those bailouts could also cost less than anticipated. “The script on Fannie and Freddie is still being written,” he said. “We could end up saying Fannie and Freddie didn’t cost us all that much either.”

But the bailouts have been deeply unpopular. Critics point to them as a symbol of costly overreach and as proof that the government thought some companies were too big to fail.

In a Newsweek poll last fall, 63% of respondents said the government’s actions to rescue the banking and financial system were bad for the country. But some of that anger appears to be fueled by misconception, Kaufman said. He cited a Bloomberg poll last fall in which 60% of respondents said they thought most of the TARP money would not be recovered.

A good chunk of the money was never spent. Just $410 billion was distributed. And because the program formally ended last year and only its existing initiatives can continue to be funded, it will not spend more than $475 billion.

Massad said Treasury officials understand why the program has been so reviled, but added that the public should focus on the bottom line. “We did what we had to do, it worked better than people thought, and it’s been far cheaper than people thought it would be,” he said.

FIVE Easy Ways To MERGE Video into Your Marketing Efforts

Real estate professionals know that success is, in part, driven by how well they can create a connection. One way to do that is to integrate video into your marketing campaign. With today’s technology, it is easier than ever to capture great video. What previously required a studio, a green screen and professional media equipment can now be done with a handheld video camera and a computer. More importantly, video has the ability to increase your business, build better relationships and amplify your credibility. Here are five easy ways to integrate video into your marketing efforts (Tip: Keep your videos under two minutes for maximum effectiveness):

1. Make a Video Testimonial. What sells you better than having real clients raving about how invaluable you were in the process of buying or selling a home? At the closing, set your camera up on a tabletop tripod and simply ask the client to talk about their experience working with you. Try to get a variety of testimonials that showcase various clients and types of homes. These testimonials can be posted on your YouTube channel, your Facebook page, LinkedIn and even mentioned on Twitter.

2. Create an Agent Bio. An agent bio is a “must have” for working both Internet leads and personal referrals. Video offers you a way to create a highly-personalized experience for a potential client and enables you to add a personal touch to your introduction. Keep the introduction simple, focusing on your expertise and why selecting you will benefit the client. Keep it light, short and be sure to let your personality shine through. Make it a part of your signature, and consider hosting it separately on a private video resource like www.easyagentvideo.com where you can market the video directly with no ads.

3. Showcase Your Expertise in the Marketplace. You can provide information on market trends, short sale and foreclosure tips or interview an expert (i.e. lenders, title professionals, home inspectors). For example, you can interview a home inspector highlighting what things to look for before buying a home. Create an editorial calendar of the content you would like to provide, identify who you will team up with (if necessary) and ask them to participate.

4. Create Neighborhood Tours. This is a true low-hanging fruit opportunity to become the dominant video source for your area. Create lots (dozens) of area tours showcasing fun and exciting things about your area, such as the local farmers market, the town square, best restaurants and great shopping. Tag these and introduce your real estate business on each one. They don’t have to be real estate ads, just organically and authentically show why you love your area and why it is such a great place to live. As viewers find these videos, they will find you too!

5. Create a Just-Moved Buyer Tour. Offer to create a short video for your client showing highlights of the buying experience, the excitement of moving in and your client’s top remodeling projects. Your client will send the video to family and friends, which can generate referral business for you.